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A   COLLECTION  OF  PAPERS 

BY 
AMERICAN  ECQAXkflS  7.S.  AND  SPECIALISTS 


EDITED    BY 


EDWARD  W.   BEMIS,  Ph.D. 

Professor  of  Economic  Science  in  the  Kansas  State 
Agricultural  College 


New  York  :  46  East  Fourteenth  Street 

THOMAS  Y.  CROWELL  &  COMPANY 

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Copyright,  1899, 
By  Thomas  Y.  Crowell  &  Company. 


Typography  bt  C.  J.  Petees  &  Son, 
J50ST0N, 


PREFACE. 


Every  one  concedes  that  soon  one  half  of  the 
population  of  this  country  will  be  living' in  cities 
of  over  8,000  inhabitants,  and  that  to  every  one  of 
these  cities  the  supply  of  water,  street  railways, 
electric  light,  gas  for  fuel  and  lighting  purposes, 
and  the  telephone  at  the  command  of  every  one,  if 
not  in  every  home,  will  have  become  vital  necessi- 
ties. Nearly  every  one  is  also  ready  to  concede 
that  each  of  these  industries  partakes  of  the  char- 
acter of  a  monopoly. 

Although  competition  has  been  tried  in  hundreds 
of  places,  combination,  either  avowed  or  tacit,  has 
always  been  the  result.  The  longest  continued 
competition  has  been  between  gas  and  electric  light, 
but  consolidation  has  now  occurred  among  com- 
panies producing  even  such  distinct  forms  of  illu- 
mination as  these. 

Three  great  questions  now  confront  us  :  Shall 
we  have  public  regulation,  or  public  ownership 
and  operation?  If  the  former,  what  shall  be  the 
nature  of  the  regulation?  If  the  latter,  what  are 
the  dangers  to  be  avoided?     Upon  each  of  these 

v 


vi  PREFACE. 

questions  it  is  hoped  that  this  book  will  throw 
some  light. 

While  the  writers  of  the  following  chapters  are 
in  more  or  less  pronounced  sympathy  with  an 
extension  of  public  ownership  of  these  city  monop- 
olies, the  attempt  has  been  made  to  treat  the 
whole  problem  broadly,  and  in  full  recognition  of 
the  difficulties  involved  in  any  suggested  solution. 
Without  the  power  of  government  it  is  of  course 
impossible  to  present  exhaustive  statistics,  but  it 
is  possible  to  give  more  detailed  studies  of  some 
of  the  great  problems  connected  with  municipal 
monopolies  than  is  customary  in  a  purely  statistical 
investigation  by  the  government. 

In  order  that  more  points  of  view  and  a  wider 
range  of  facts  may  be  presented  than  can  be 
given  by  any  one  person,  the  co-operation  of 
several  acknowledged  authorities  in  this  line  of 
study  has  been  secured.  The  result  is  that  Mr. 
M.  N.  Baker,  of  the  Engineering  News  of  New  York 
City,  writes  upon  water-works  ;  Professor  John  R. 
Commons,  of  Syracuse  University,  and  Professor 
F.  A.  C.  Perrine,  of  the  Engineering  Department 
of  Leland  Stanford  University,  discuss  electric 
lighting;  Mr.  Max  West,  Ph.D.,  of  the  Agricul- 
tural Department  at  Washington,  describes  New 
York  City  franchises ;  and  Professor  Frank  Par- 
sons, of  the  Boston  School  of  Law  and  the  Kansas 
State  Agricultural  College,  treats  of  the  telephone, 


PREFACE.  vii 

and  the  legal  aspects  of  municipal  problems.  The 
writer  has  supplied  some  information  on  various 
phases  of  the  electric  light,  gas,  and  street-railway 
questions. 

Acknowledgment  is  hereby  given  to  Municipal 
Affairs  for  its  permission  to  Professor  Commons  to 
use  large  portions  of  his  article  of  December,  1897. 

While  some  portions  of  this  work  are  particu- 
larly designed  for  special  students  of  the  subject, 
it  is  believed  that  the  book  as  a  whole  will  be  of 
interest  and  value  to  the  general  reader. 

These  chapters  are  now  offered  to  the  public  in 
the  hope  that  they  will  aid  in  the  solution  of  prob- 
lems which  are  of  pressing  importance  to  every 
community  in  the  land. 

EDWARD  W.  BEMIS. 

Manhattan,  Kansas. 
January  25,  1899. 


CONTENTS. 


CHAPTER  PAGE 

I.    Water-Works     ....'-  M.  N.  Baker   .    .        3 
II.    Municipal   Electric 

Lighting John  B.  Commons      55 

III.  The      Latest      Electric 

Light  Keports    .     .     .     Edward  W.  Bemis    183 
Appendix  —  Validity  of 
Electric    Light    Com- 
parisons  F.  A.  C.  Perrine  .    286 

IV.  The  Telephone  ....     Frank  Parsons     .    299 
V.    Municipal  Franchises  in 

New  York Max  West    ...  365 

VI.    Legal   Aspects    of   Mo- 
nopoly      Frank  Parsons     .  425 

VII.     Street  Railways    .     .     .  Edward  W.  Bemis  505 

VIII.     Gas Edward  W.  Bemis  587 

IX.    Regulation    or    Owner- 
ship       Edward  W.  Bemis  631 

Index 681 


IX 


I. 

¥ATER-¥OEKS. 


WATEK-WOKKS. 

By  M.  N.  BAKER,  Ph.B. 

Associate  Editor  of  "Engineering  News,"  New  York  City. 
Editor  of  "Manual  of  American  Water-Works." 


THE    SUBJECT    OUTLINED. 

A  plenteous  supply  of  pure  water  is  one  of 
the  greatest  blessings  that  can  be  bestowed  upon 
a  community.  Like  most  of  the  other  good  things 
of  this  world,  it  does  not  come  for  the  asking,  nor 
can  it  be  maintained  without  an  effort. 

The  thoughtless  sometimes  assert  that  water 
should  be  as  free  as  the  air  or  sunshine;  and  it 
has  been  well  said,  in  reply :  so  it  is,  for  those  who 
will  take  a  bucket  and  fetch  it.  The  truth  is,  that 
air  and  sunshine  and  water  are  free  to  man  only 
when  he  is  in  a  primitive  condition.  With  only 
the  blue  sky  and  the  verdant  trees  to  cover  him, 
and  mountain  walls  to  hem  him  in,  he  may  breathe 
the  most  bracing  air,  bask  in  the  warmest  sunshine, 
and  drink  the  purest  water  without  money  or  ques- 
tion. Once  let  him  pass  from  his  primitive  haunts 
to  the  condition  of  civilization,  and  all  changes. 

3 


4  MUNICIPAL  MONOPOLIES. 

There  is  no  continual  supply  of  fresh  air  without 
sufficient  ventilation  ;  no  sunshine  indoors  without 
windows ;  no  water  without  the  labor  of  the  hand 
or  the  service  of  the  pump  or  aqueduct ;  even  a 
pail  in  which  to  carry  water  costs  money,  rusts 
out  or  weal's  out,  and  must  he  renewed. 

The  larger  the  aggregation  of  human  life,  the 
greater  the  difficulty  and  expense  of  securing  air, 
sunsihiri-e,  and  v.;:.lt  r ;  until  finally  large  numbers 
of  the. people ,seek  homes  in  the  country  or  in  the 
5«Jiurbsv •wdaile:  parks -.and  playgrounds  are  estab- 
lished for  those  who  must,  or  through  a  strange 
perversity  will,  stay  in  the  crowded  cities;  and 
pure  water  is  conveyed  from  some  distant  point, 
or  a  nearby  supply  is  subjected  to  a  costly  process 
of  purification. 

Free  water,  then,  is  a  fallacy ;  at  least  for  the 
town-dweller.  As  a  matter  of  fact,  it  can  be  se- 
cured only  by  the  co-operation  of  the  financier, 
chemist,  biologist,  engineer,  health  officer,  legal 
adviser,  skilled  artisan,  and  humble  laborer.  The 
problem  of  obtaining  it  is  daily  becoming  more 
difficult  with  increasing  populations  and  new  uses 
demanding  ever  greater  quantities.  At  the  same 
time  pure  water  is  becoming  more  and  more  inac- 
cessible through  the  denuding  of  forest  lands,  the 
cultivation  of  fields,  and  the  encroachments  of 
towns,  —  all  tending  to  diminish  the  quantity  of 
water  available,  and  deteriorate  its  quality. 


WATER-WORKS.  5 

How  this  problem  of  water  supply  may  be  best 
solved  is  a  serious  question,  especially  as  the  grow- 
ing scarcity  of  naturally  pure  water  increases  both 
the  cost  of  water  supplies,  and  the  skill,  intelli- 
gence, and  conscientious  attention  to  details  ne- 
cessary in  the  construction  and  operation  of  water- 
works plants. 

The  problem  is  further  complicated  by  the  fact, 
that  while  in  providing  many  of  the  other  neces- 
saries of  life  the  keenest  competition  always  tends 
to  keep  prices  at  the  minimum  and  quality  at  the 
maximum  point,  here  competition  is  practically 
lacking,  as  is  easily  shown  by  theory,  and  abun- 
dantly established  by  experience. 

Just  how  the  water-supply  problem  can  best  be 
solved  is  a  matter  involving  engineering,  financial 
and  political  considerations,  including  under  the 
latter  head  the  whole  question  of  municipal  own- 
ership. These  various  considerations  are  largely 
interdependent,  and  can  best  be  discussed  by  in- 
quiring first,  "What  constitutes  an  efficient  water- 
works plant?  " 

A  public  water  supply  should  be  pure,  then 
plentiful,  under  good  pressure,  provided  at  a  mki- 
imuin  expense,  and  so  administered  as  to  raise 
rather  than  lower  the  civic  standard  of  the  com- 
munity. 

Purity,  for  present  purposes,  may  be  taken  to  in- 
clude all  that  relates  to  the  quality  of  the  supply, 


6  MUNICIPAL  MONOPOLIES. 

or  an  absence  of  all  objectionable  matter,  whether 
perceptible  or  imperceptible  to  the  senses.  By  far 
the  greatest  danger  lies  in  impurities  not  discern- 
ible to  the  eye,  nose,  or  taste ;  that  is,  disease 
germs,  which  never  get  into  water  unless  the  lat- 
ter is  polluted  by  sewage.  Water,  unpleasant  in 
taste,  odor,  or  color,  so  high  in  certain  mineral 
salts  as  to  be  termed  "hard,"  or  carrying  such 
quantities  of  silt  in  suspension  as  to  deserve  the 
name  roily,  inky,  or  muddy,  at  once  raises  a  storm 
of  public  protest;  but  it  is  never  so  much  to  be 
feared  as  some  clear,  sparkling  water,  pleasant  to 
all  the  senses  passing  judgment  upon  it,  but  yet 
carrying  thousands  of  germs  of  typhoid  fever  or 
cholera.  These  two  diseases,  it  may  be  stated, 
are  the  only  ones  known  to  be  conveyed  from  man 
to  man  by  water,  and  cholera  may  be  practically 
ignored  in  this  country.  Water  and  milk  are  the 
great  carriers  of  typhoid-fever  germs,  and  are  re- 
sponsible for  nearly  all  the  epidemics  of  the  dis- 
ease that  arise.  Milk  is  a  source  of  infection,  very 
largely  through  the  use  of  polluted  water  in  wash- 
ing dairy  utensils,  or  (with  apologies  to  the  milk- 
man) in  diluting  milk.  With  water  in  both  city 
and  country  free  from  pollution  from  human  or- 
ganic wastes,  typhoid  fever  would  disappear  almost 
as  if  by  magic.  Other  impurities  are  for  the  most 
part  unpleasant ;  this  is  deadly.  Tons  of  mud  in 
a  public  water  supply  may  have  no  other  effect 


WATER -WORKS.  7 

upon  a  community  than  temporarily  to  derange  a 
few  stomachs ;  one  or  two  typhoid  cases,  improperly 
tended,  in  the  gathering  grounds  of  a  public  water 
supply,  may  decimate  a  town,  as  was  the  case  at 
Plymouth,  Penn.,  a  number  of  years  ago.  But 
while  all  this  is  true,  mud,  bad  odors  and  tastes, 
color,  even  if  not  very  decided,  and  marked  traces 
of  iron  and  hardness,  are  highly  objectionable  char- 
acteristics of  water  supplies,  and  should  not  be 
tolerated  for  a  moment  when  preventable  at  rea- 
sonable expense.  Happily  new  sources  of  supply, 
the  prevention  of  pollution,  or  well-established 
means  of  purification,  make  pure  water  a  possibility 
for  any  determined,  self-respecting  community. 

Next  in  importance  to  pure  water  a  plentiful 
supply  was  mentioned  above,  and  it  was  said  that 
this  should  be  under  good  pressure.  While  for 
pure  water  there  are  certain  definite  and  universal 
standards,  quantity  and  pressure  vary  with  local 
conditions.  Obviously,  other  things  being  equal, 
a  community  with  large  private  lawns  to  sprinkle 
and  many  plumbing  fixtures  in  the  majority  of  its 
houses  requires  more  water  per  capita  than  one 
in  which  contrary  conditions  prevail ;  and  greater 
pressures  are  needed  in  towns  with  four-story 
buildings  than  in  villages  where  the  maximum 
height  is  two  stories.  But  again,  the  community 
with  small  lawns  and  few  plumbing  fixtures  may 
have    large    and   numerous  manufacturing  estab- 


8  MUNICIPAL   MONOPOLIES. 

lishments,  which  consume  immense  quantities  of 
water ;  and  the  village  with  two-story  buildings 
may  enjoy  a  gravity  supply  from  a  high  mountain 
source,  affording  heavy  pressures  ;  while  the  town 
with  tall  buildings  may  be  obliged  to  pump  all  its 
water  from  a  level  some  distance  below  it,  thus 
making  it  necessary  to  supplement  the  water-works 
pressure  with  that  secured  from  fire-engines. 

It  is  far  easier  to  name  a  figure  for  maximum 
consumption  than  for  pressure  ;  since  the  waste  of 
most  communities  is,  if  checked,  large  enough  to 
afford  ample  leeway  for  variations  in  local  con- 
ditions. A  daily  per  capita  consumption  of  100 
gallons  is  considered  by  engineers  as  a  liberal 
allowance  of  water.  This  figure  is  often  exceeded, 
owing  to  the  enormous  waste  in  many  American 
cities  and  towns ;  but  it  is  also  far  above  the  con- 
sumption in  a  number  of  cities  where  means  have 
been  taken  to  prevent  waste. 

As  to  pressure,  no  attempt  will  be  made  to  name 
a  definite  figure.  Broadly  speaking,  the  pressure 
should  be  sufficient  to  deliver  water  for  domestic 
purposes  on  any  floor  of  a  house,  and  to  serve  for 
fire  protection  ;  although,  as  has  already  been  said, 
local  conditions  may  make  it  necessary  or  advisable 
to  supplement  the  water-works  plant  with  the  fire- 
engine.  In  this  connection  it  should  be  remem- 
bered that  it  is  only  for  a  few  hours  in  a  year, 
comparatively  speaking,  that  there  are  fires  to  fight, 


WA  TER  -  WORKS.  9 

so  that  it  may  be  far  cheaper  to  use  fire-engines 
at  such  times  than  to  maintain  fire  pressure  con- 
stantly. In  fact,  where  water  is  pumped,  a  similar 
practice  commonly  prevails,  even  though  no  fire- 
engines  are  used  in  the  streets,  reserve  pumps  for 
just  this  purpose  being  installed  and  kept  ready 
for  immediate  use  at  the  pumping-station. 

The  cost  of  water  also  varies  with  local  con- 
ditions, and  with  such  a  variety  of  them  as  to  make 
a  single  standard  of  cost  impossible,  and  compar- 
ative figures  of  only  general  value.  It  is  popu- 
larly supposed  that  water  from  a  gravity  source 
can  be  furnished  at  much  less  cost  than  where 
pumping  is  employed ;  but  this  does  not  always 
follow,  since  low  operating  expenses  in  the  case  of 
a  gravity  supply  may  be  entirely  offset  by  heavy 
capital  charges  on  account  of  large  impounding 
reservoirs  and  long  supply  conduits  to  convey  water 
from  distant  sources.  This  popular  misconception 
in  itself  often  increases  the  cost  of  public  water 
service ;  gravity  supplies  being  sometimes  used 
and  wasted  lavishly  because  there  is  no  cost  for 
pumping,  it  being  forgotten  that  with  increased 
consumption  larger  supply  conduits,  reservoirs, 
distributing  mains,  and  other  necessities  must  be 
provided. 

In  determining  whether  a  given  community  is 
paj'ing  more  than  it  ought  for  its  water  supply, 
local  conditions  should  be  given  more  weight  than 


10  MUNICIPAL   MONOPOLIES. 

the  cost  of  water  elsewhere,  although  this  last 
may  often  be  considered  to  advantage.  If  the 
works  are  owned  by  a  company,  the  rates  for  pub- 
lic and  private  service  should  yield  a  fair  rate  of 
interest  on  the  capital  invested,  all  risk  considered  ; 
if  owned  by  the  city,  the  rates  should  be  such  as 
to  make  the  works  self-supporting.  In  either  case, 
the  burden  borne  by  the  private  consumers  and  the 
general  public,  including  in  the  latter  water  for 
fire  protection,  street-sprinkling,  sewer-flushing, 
and  public  buildings,  should  be  carefully  adjusted, 
so  that  each  shall  not  be  called  upon  to  carry  more 
than  its  proper  share. 

The  effect  of  water-works  administration  upon 
the  civic  standard  of  a  community  may  be  either 
to  raise  or  lower  the  general  character  of  the  muni- 
cipal officers,  to  increase  or  decrease  the  interest 
of  the  best  men  of  the  community  in  municipal 
affairs,  and  to  lessen  or  augment  the  friction  which 
invariably  arises  to  a  greater  or  less  extent  between 
private  consumers  and  water-works  officials.  The 
form  of  administration  that  raises  the  standard  of 
municipal  officers,  increases  intelligent  interest  in 
municipal  affairs,  and  reduces  friction  to  a  minimum, 
is  of  course  the  one  to  be  desired,  and  it  may  be 
relied  upon  to  give  the  most  efficient  water-works 
service. 

Having  noted  briefly  the  prime  essentials  of  an 
efficient  water-works  plant,  it  may  be  asked  whether 


WA  TER  -  WORKS.  1 1 

they  may  be  best  secured  under  public  or  private 
ownership.  The  question  is  not  easy  to  answer, 
owing  to  its  complexity,  the  difficulty  experienced 
in  obtaining  the  necessary  data,  and  the  bearing  of 
local  conditions  upon  each  specific  case  taken  into 
consideration.  Fortunately,  both  the  present  and 
past  ownership  of  water-works  in  the  United  States 
and  Canada  is  known,  together  with  such  changes 
as  have  taken  place.  These  facts  and  figures  will 
be  presented  first,  as  showing  the  attitude  of  the 
country  on  the  subject  of  ownership. 

THE  HISTORY   AND   PRESENT    STATUS  OF    OWNER- 
SHIP   OF    WATER- WORKS   IN   AMERICA. 

The  first  public  water  supply  of  record  in  this 
country  was  introduced  in  Boston  in  1652,  only 
thirty-two  years  after  the  Mayflower  cast  anchor 
off  Plymouth  Rock,  and  but  twenty-two  years  after 
the  founding  and  naming  of  the  settlement  called 
Boston. 

The  choice  of  the  site  of  Boston  was  largely  due 
to  the  fact  that  a  good  spring  of  water  existed 
there,  and  that  the  springs  at  Charlestown  had 
failed,  where  Governor  John  Winthrop  and  his 
sturdy  colony  of  Massachusetts  Bay  had  settled 
only  a  short  time  before.1 

1  See  "  Boston,"  by  Henry  Cabot  Lodge,  in  Longmans,  Green,  & 
Co.'s  Historic  Towns  series. 


12  MUNICIPAL  MONOPOLIES. 

The  old  records  describe  the  emigration  from 
Charlestown  (now  a  part  of  Boston)  as  follows  :  — 

"  In  the  meantime  Mr.  Blackstone,  dwelling  on  the 
other  side  of  Charles  River  alone,  at  a  place  by  the  Indians 
called  Shawmutt,  where  he  only  had  a  cottage  at  or  not 
far  off  the  place  called  Blackstone's  Point,  he  came  and 
acquainted  the  Governor,  of  an  excellent  spring  there ; 
withal]  inviting  him  and  soliciting  him  thither.  Where- 
upon, after  the  death  of  Mr.  Johnson  and  divers  others, 
the  Governor,  with  Mr.  Wilson,  and  the  greatest  part  of 
the  church  removed  thither ;  whither  also  the  frame  of  the 
Governor's  house  in  preparation  at  this  town,  was  also  (to 
the  discontent  of  some)  carried ;  where  people  began  to 
build  houses  against  winter ;  and  this  place  was  called 
Boston." 

This  early  water  supply  of  1652  was  but  a 
small,  simple  reservoir,  to  which  water  was  con- 
veyed by  gravity  through  wooden  pipes  from 
neighboring  springs  ;  but  it  was  a  common  or  pub- 
lic supply  for  all  that,  and  was  doubtless  a  notable 
undertaking  in  those  da}S  for  the  men  who  in- 
corporated the  "  "Water-Works  Company." 

More  like  the  modern  popular  conception  of  a 
water-works  system  were  the  works  built  over 
a  hundred  years  later  at  Bethlehem,  Pa.  Here, 
tk  after  severe  struggles,"  lasting  seven  years,  Hans 
Christopher  Christiansen,  a  millwright  and  native 
of  Denmark,  completed  works  in  1761.  The  water 
was  derived  from  a  spring,  as  at  Boston ;  but  in- 
stead of  flowing  by  gravity  to  a  reservoir,  it  was 


WATER-WORKS.  13 

lifted  seventy  feet  by  a  wooden  pump  to  a  tank  in 
the  village  square. 

In  their  early  history  these  works  "  filled  those 
who  saw  them  with  astonishment  and  admiration  ;" 
and  on  a  register  kept  at  that  time  are  the  names 
of  many  visitors  of  note,  among  whom  were:  "In 
April,  1768,  Governor  Penn  and  Lady  and  Lord 
Charles  Montague;  in  1774,  Baron  Von  Reefs- 
dorf;  in  1777,  John  Adams;  in  July,  1782,  Gen- 
eral George  Washington,  with  his  adjutants."  l 

Besides  Boston  and  Bethlehem,  the  only  other 
record  of  the  introduction  of  a  public  water  supply, 
prior  to  the  Declaration  of  Independence,  states 
that  two  companies  built  works  at  Providence  in 
1772.  From  this  time  on  through  all  the  Revolu- 
tionary period,  the  formation  of  the  Constitution, 
and  the  earlier  years  of  the  new  republic  down 
through  the  greater  part  of  Washington's  two  ad- 
ministrations, or  in  the  fourteen  years  from  1772 
to  1786,  only  one  new  water-works  is  recorded ; 
and  this  plant,  at  Geneva,  N.Y.,  was  not  built 
until  1787,  nearly  five  years  after  the  acknowledg- 
ment of  the  Independence  of  the  United  States  by 
Great  Britain. 

In  the  last  five  years  of  the  eighteenth  century 
the  four  works  built  during  the  previous  145  years 
were  increased  by  three  times  that  number. 

1  "The  Manual  of  American  Water-Works"  for  1889-1890, 
under  Bethlehem,  Penn. 


14  MUNICIPAL  MONOPOLIES. 

There  were,  therefore,  at  the  end  of  1800,  16 
water-works  in  the  United  States,  all  but  one  of 
which  had  been  built,  and  were  then  owned  and 
operated,  by  private  parties  ;  Winchester,  Va.,  with 
works  established  "before  1800,"  bearing  the  dis- 
tinction of  being  the  only  plant  then  owned  by 
a  municipality.  The  location  of  these  16  works, 
the  years  in  which  each  was  built  and  in  which 
each  of  the  municipalities  having  private  plants, 
save  Morristown  alone,  changed  to  public  owner- 
ship, are  given  in  Table  I. 

From  this  small  beginning  of  16  works  at  the 
close  of  the  last  century,  the  number  had  increased 
to  3,196  plants  early  in  1897,  supplying  more  than 
that  number  of  towns  with  water  for  both  public 
and  private  purposes,  while  many  additional  works 
afforded  either  an  exclusively  domestic  or  an  ex- 
clusively fire-protection  supply.1 

As  has  been  stated,  all  but  one  of  the  16  plants 
in  operation  in  1800  were  under  private  ownership, 
and  14  of  the  15  private  works  have  since  given 
way  to  public  ownership.  While  these  works  have 
been   changing  ownership,   additional  public  and 


1  Unless  otherwise  stated,  the  term  water-works,  in  this  dis- 
cussion, will  denote  a  plant  rendering  a  supply  for  domestic  and 
manufacturing  or  private  service,  and  water  for  fire  protection, 
street-sprinkling,  sewer-rlushing,  and  other  public  uses.  Some  of 
the  earlier  works  afforded  only  partial  service;  but  this  meant 
much  in  those  days,  and  such  plants  will  be  considered  as  full 
works. 


WATER -WORKS. 


15 


TABLE    I. 

Water -Works  in  the  United  States  at  the  Close  of  1800.1 


Located  at 

Date  Built. 

Change  to  Public 
Ownership. 

Boston,  Mass. 

1652 

1848 

Bethlehem,  Pa. 

1761 

1871 

Providence,  R.I. 

1772 

1871 

Geneva,  N.Y. 

1787 

1896 

Plymouth,  Mass. 

1796 

1855 

Salem,  Mass. 

1796 

1873 

Hartford,  Conn. 

1797 

1854 

Portsmouth,  N.H. 

1798 

1891 

"Worcester,  Mass. 

1798 

1852 

Albany,  N.Y. 

1798  or  1799 

1851 

Peabody,  Mass. 

1799 

1873 

New  York,  N.Y. 

1799 

1843 

Morristown,  N.J. 

1799 

(Still  private) 

Lynchburg,  Va. 

1799 

1828 

Winchester,  Va. 

Before  1800 

(Always  public) 

Newark,  N.J. 

1800 

1860 

SUMMARY   BY    STATES. 


Connecticut, 

1 

Pennsylvania, 

1 

New  York, 

3 

Virginia, 

2 

New  Jersey, 

2 

Total, 

16 

New  Hampshire,  1 
Massachusetts,  5 
Rhode  Island,  1 


private  works  have  been  changing  from  one  class 
to  another,  by  purchase  or  by  being  crowded  out 
through  competition.  Of  the  3,196  works  at  the 
beginning  of  1897,  over  half,  or  53.2  per  cent, 
were  owned  by  the  municipalities  in  which  they 

1  These  figures  and  those  in  the  three  following  tables  are 
compiled  from  "The  Manual  of  American  Water-Works"  for 
1897,  and  previous  issues  of  the  same  work,  all  edited  by  the 
author,  and  published  by  the  Engineering  Publishing  Company, 
New  York. 


16 


M UNIC1PAL  MOyOPOLIES. 


are  located,  there  being  1,690  public  and  1,489 
private  works,  besides  12  of  the  joint  and  five 
of  unknown  ownership.  The  number  of  works  of 
each  of  these  two  classes,  with  the  corresponding 
percentages  at  the  close  of  each  half  decade,  is 
shown  by  Table. II. 


TABLE  II.  Number  of  Public  and  Private  Works  in  the 
United  States  at  the  End  of  Each  Half  Decade,  Beginning 
with  1800. 


Year. 

Public. 

Private. 

Total. 

Per  Cent. 

of  Total. 

Public. 

Private. 

1800 

1 

15 

16 

6.3 

93.7 

1805 

2 

21 

23 

8.7 

91.3 

1810 

5 

21 

26 

19.2 

80.8 

1815 

5 

21 

26 

19.2 

80.8 

1820 

5 

25 

30 

16.6 

83.4 

1825 

5 

27 

32 

15.6 

84.4 

1830 

9 

35 

44 

20.5 

79.5 

1835 

15 

39 

54 

27.8 

72.2 

1840 

23 

41 

64 

35.9 

64.1 

1845 

27 

43 

70 

38.6 

61.4 

1850 

33 

50 

83 

39.7 

60.3 

1855 

48 

58 

106 

45.3 

54.7 

1860 

57 

79 

136 

41.9 

58.1 

1865 

68 

94 

162 

42.0 

58.0 

1870 

116 

127 

243 

47.7 

52.3 

1875 

227 

195 

422 

53.8 

46.2 

1880 

293 

305 

598 

49.0 

51.0 

1885 

447 

566 

1013 

44.1 

55.9 

1890 

806 

1072 

1878 

42. 9 

57.1 

1896 

1690 

1489 

3196  l 

53.2 

46.8 

At  the  end  of  the  first  quarter  of  the  present 
century  the  number  of  works  had  exactty  doubled ; 

1  Include  12  of  joint  and  5  of  unknown  ownership. 


WA  TER  -  WORKS.  1 7 

but  yet  there  were  only  32  plants,  and  all  but  five 
of  these  were  owned  by  private  companies  or  by 
individuals,  four  public  works  having  been  added 
in  the  first  ten  years  of  the  period,  but  none  from 
1810  to  1825,  or  during  the  second  war  period  of 
the  country  and  the  years  immediately  preceding 
and  following  it. 

From  1825  to  1855  the  percentage  of  public 
works  increased  from  15.6  to  45.3  of  the  total ;  but 
the  agitation  preceding  the  Civil  War,  and  the  war 
itself,  set  back  the  development  of  public  works  to 
42  per  cent  in  1865.  In  1863,  the  central  year 
of  the  struggle,  not  a  single  water-works  plant  was 
built.  The  ten  years  following  the  war  fore- 
shadowed the  rapid  water-works  development  of 
the  last  ten  or  eleven  years,  the  total  number  of 
plants  increasing  from"  162  in  1865  to  422  in  1875. 
At  the  same  time  there  was  renewed  activity  in 
the  construction  of  works  by  cities  and  towns, 
public  ownership  reaching  53.8  per  cent  of  the 
total  in  1875,  which  was  high-water  mark.  From 
1875  to  1890,  Table  II.,  shows  a  great  increase  in 
the  number  of  works ;  but  in  these  fifteen  years 
franchise-getting  became  a  business,  and  private 
ownership  again  shot  ahead,  public  ownership  fall- 
ing to  42.9  per  cent  in  1890,  or  about  what  it  was 
at  the  close  of  the  Civil  War. 

These  fifteen  years,  from  1875  to  1890,  were  the 
palmy  days  of  water-works  promoting.     There  were 


18  MUNICIPAL  MONOPOLIES. 

many  large  towns  still  dependent  upon  polluted  sur- 
face wells  for  a  water  supply,  and  municipal  im- 
provements and  rapid  growth  in  population  were 
the  order  of  the  day. 

The  numerous  demands  upon  municipal  treas- 
uries for  public  works  not  ordinarily  carried  out  by 
private  capital  made  it  especially  easy  to  intrust 
to  companies  those  classes  of  works  where  private 
ownership  had  been  always  in  the  ascendant. 
Hence  horse  railways  continued  wholly  under  pri- 
vate ownership ;  gas-works  almost  universally  so ; 
and  water-works,  which  for  the  most  part  had  al- 
ways numbered  more  company  than  city  plants, 
fell  a  little  on  the  city  side  of  the  scale.  Water- 
works grew  rapidly  in  numbers  in  order  to  keep 
pace  with  the  increasing  demands  of  urban  popu- 
lations for  the  comforts  and  conveniences  of  mod- 
ern plumbing,  while  a  growing  appreciation  of  the 
dangers  arising  from  depositing  human  wastes  in, 
and  drawing  water  for  household  use  from,  holes 
in  the  same  dooryard  stimulated  still  further  the 
desire  for  water-works.  The  growth  of  cities  in 
population  resulted  in  the  closer  building  up  of 
urban  areas  and  in  greater  fire  risks,  so  that  works 
were  imperatively  demanded  for  fire  protection. 
Health  was  endangered  by  impure  water,  and  life 
and  property  by  the  lack  of  ample  quantities  of 
water  of  any  kind.  The  competition  of  city  with 
city,  town  with  town,  and  village  with  village,  made 


WA  TER  -  WORKS.  19 

water-works  seem  to  be  an  imperative  necessity. 
Such  private  plants  as  had  been  built  had  been 
successful  in  the  main,  at  least  where  well  man- 
aged. In  fact,  it  was  for  many  years  the  boast  of 
dealers  in  the  water-works  securities  that  no  water 
company  had  yet  defaulted  on  its  bonds. 

As  a  result  of  all  these  conditions,  promoters 
found  it  easy  to  secure  water-works  franchises,  and 
also  easy  to  enlist  capital  to  build  works,  or  to  sell 
for  a  handsome  sum  the  franchises  which  the  pub- 
lic had  given  them  for  the  asking.  These  sales 
would  be  made  before  anything  had  been  done 
towards  the  actual  construction  of  works.  Man- 
ufacturers of  and  dealers  in  supplies  accepted 
water-works  securities  in  settlement  for  their 
claims,  or  even  secured  franchises  and  built  works 
to  find  a  market  for  their  material.  In  view  of 
all  these  facts,  it  is  not  surprising  that  of  1,878 
water-works  in  the  United  States  at  the  close  of 
1890,  only  806  or  42.9  per  cent  should  have  been 
owned  by  the  respective  municipalities  in  which 
they  were  located. 

In  the  last  six  years  the  tide  has  set  the  other 
way,  and  municipal  ownership  has  been  on  the  in- 
crease. This  has  come  about  partly  because  the 
larger  towns,  those  most  attractive  to  private  capi- 
tal, are  now  all  provided  with  works,  so  that  it  is 
less  an  object  than  formerly  to  secure  water-works 
franchises ;   partly  because  it  is  less  easy  than  a 


20  MUNICIPAL   MONOPOLIES. 

few  years  ago  to  get  a  franchise,  owing  to  a  grow- 
ing sentiment  in  favor  of  public  works  ;  and  partly 
because  the  cities  and  towns  have  been  buying  the 
private  works  for  operation  on  their  own  account. 
This  change  in  sentiment  and  practice  is  due 
to  the  pronounced  feeling  for  public  ownership  of 
water-works,  evident  ever  since  the  first  third  of 
the  century  passed,  as  is  shown  by  Table  II.,  and 
to  the  further  fact  that  municipal  finances  are  now 
in  better  condition  than  formerly,  thus  allowing 
public  ownership  where  it  was  previously  impossi- 
ble. Added  to  this  is  the  fact  that  the  whirlwind 
is  now  being  reaped  where  the  wind  was  sown,  by 
both  promoters  and  cities,  a  few  years  back.  Fran- 
chises were  granted  and  accepted  on  almost  any 
terms,  being  generally,  but  not  always,  most  favor- 
able to  the  recipient.  They  were  carelessly  drawn, 
from  the  standpoint  of  both  parties  in  interest,  al- 
though the  promoters  were  experienced  in  franchise 
matters,  and  the  cities  generally  quite  inexperi- 
enced, or  they  failed  to  profit  from  the  plain  les- 
sons of  the  past,  so  that  the  city  was  quite  sure  to 
get  the  worst  end  of  the  bargain.  In  some  sections 
the  rates  for  public  and  private  services,  as  fixed 
in  the  franchises  or  contracts,  were  too  high  from 
the  start,  or  became  burdensome  when  the  rever- 
berations of  the  boom,  so  characteristic  of  a  few 
years  ago,  were  suddenly  followed  by  a  painful 
silence.      The    several  unfortunate  circumstances 


WATER -WORKS.  21 

named,  with  their  accompanying  friction  between 
private  consumers  and  water  companies,  and  vari- 
ous conflicts  between  municipalities  and  companies, 
have  tended  largely  to  bring  the  latter  into  dis- 
favor. This  tendency  has  been  increased  by  a 
growing  belief,  sometimes  well  founded  and  some- 
times not,  that  large  dividends  are  paid  on  actual 
or  watered  stock ;  that  valuable  franchises  of  all 
sorts  have  been  granted  in  the  past  without  due 
consideration  of  the  rights  of  the  people  contribut- 
ing to  their  value  ;  and  by  the  financial  straits  and 
receiverships  of  many  companies,  caused  often  by 
the  fast  and  loose  speculative  games  of  their  origi- 
nal promoters. 

It  is  not  strange,  then,  that  early  in  1897  public 
water-works  in  the  United  States  outnumbered 
private  by  about  200,  the  whole  number  of  pub- 
licly owned  works  being  53.2  per  cent  of  the  enor- 
mous total  of  3,196  plants. 

The  two  great  causes  for  this  swing  from  private 
to  public  preponderance  of  ownership  have  been 
the  number  of  small  public  works  built  in  the  last 
six  years,  notably  in  the  Northwestern  States  (see 
Table  III.  for  classification),  and  the  numerous 
changes  of  late  from  private  to  public  owner- 
ship. 

The  present  number  and  ownership  of  water- 
works in  each  State  of  the  Union,  and  the  total 
number  of  changes  within  the  century  from  private 


22 


MUNICIPAL   MONOPOLIES. 


to  public  ownership,  and  the  reverse,  are  shown  by 
Table  III. 


TABLE  III.       Number  and^  Ownership  of  Water- Works,   by 
States,  early  in  1897,  and  Changes  in  Ownership. 


States  and  Groups. 

No.  and  Ownership 
of  Works. 

Changes 
in  own- 
ership. 

t. 

o 

O     . 

o 

2 

3 

> 

i-8 

«3 

►.  3 

if 

57 

7 

50 

0 

12.3 

2 

0 

New  Hampshire     .     .     . 

53 

24 

27 

2 

45.3 

11 

0 

40 

29 

17 

0 

63.0 

6 

0 

Massachusetts     .... 

151 

113 

38 

0 

74.8 

29 

0 

15 

6 

9 

0 

40.0 

2 

1 

New  England  States  .     . 

59 

15 

44 

0 

25.4 

3 

0 

381 

194 

185 

2 

50.9 

53 

1 

342 

172 

170 

0 

50.3 

26 

1 

93 

35 

58 

0 

37.6 

8 

0 

Pennsylvania      .... 

312 

82 

259 

1 

23.9 

14 

1 

7 

6 

1 

0 

85.7 

1 

0 

29 

9 

20 

0 

31.0 

2 

0 

District  of  Columbia  .     . 
Middle  States     .... 

1 

1 

0 

0 

100.0 

0 

0 

814 

305 

508 

1 

37.5 

51 

2 

48 

24 

24 

0 

50.0 

4 

0 

West  Virginia    .... 

23 

12 

10 

1 

52.1 

1 

0 

North  Carolina  .... 

18 

5 

13 

0 

27.7 

1 

0 

South  Carolina  .... 

12 

4 

8 

0 

33.3 

0 

1 

36 

26 

10 

0 

72.2 

3 

0 

South  Atlantic  States 

19 

6 

13 

0 

31.6 

0 

0 

156 

77 

78 

1 

49.3 

9 

1 

29 

9 

20 

0 

31.0 

2 

1 

9 

3 

0 

0 

33.3 

0 

0 

10 

3 

7 

0 

30.0 

0 

1 

28 

10 

18 

0 

35.7 

1 

1 

South  Central  States  .     . 

.    44 

15 

29 

0 

34.0 

0 

2 
4 

120 

40 

80 

0 

33.3 

3 

WATER-WORKS. 


23 


TABLE  in.  —  Continued. 


States  and  Groups. 


No.  and  Ownership 
of  Works. 


Ciianoes 
in  Own- 
ership. 


Ohio 

Indiana 

Michigan    .... 

Illinois 

"Wisconsin  .... 

North  Central  States 


149 
111 
156 
201 
92 


709 


114 

71 

126 

158 

56 


525      182 


76.5 

3 

63.9 

3 

80.8 

5 

78.6 

10 

60.9 

4 

74.0 

25 

Iowa  .     .     .     . 

Minnesota  .  . 
Kansas  .  .  . 
Nebraska  .  . 
South  Dakota 
North  Dakota 
Wyoming  .  . 
Montana     .     . 


Northwestern  States 


170 
93 
91 
91 
31 
10 
13 
16 


140 
81 
45 
80 
23 


515 


387 


82.4 
87.1 
49.4 
87.9 
74.2 
80.0 
61.5 
12.5 


125 


3     75.1 


26 


Missouri  .... 
Arkansas    .... 

Texas     

Colorado  .... 
New  Mexico  .  .  . 
Oklahoma  .... 
Southwestern  States 

Washington    .     .     . 

Oregon  

California  .... 

Arizona 

Nevada  

Utah 

Idaho     

Alaska 

Pacific  States      .     . 


51 

37 

121 

5 

9 

11 

14 

1_ 

249 


95 

25 
15 
19 
1 
0 
6 
1 
0 


153 

26 

21 

101 

4 

9 

4 

13 

0 


67      178 


33.8 
20.0 
26.3 
63.2 
10.0 
50.0 


37.7 

49.0 

40.5 

15.7 

20.0 

0.0 

54.5 

7.1 

0.0 

■      26.9 


24 


MUNICIPAL  MONOPOLIES. 


TABLE  in.  —  Continued. 


NO.  AND  OWNER6II1P 

or  Works. 

Changes 
in  Own- 
ership. 

States  and  Groups. 

c  ci 

B. 

o  _. 

3 

3 

> 

.5.3 
o  d 

OS 
■-  a 

S3 

>  3 
fi 

!<s 

New  England     .... 

381 

194 

185 

2 

50.9 

53 

i 

Middle   .     .     . 

814 

305 

508 

1 

37.5 

51 

o 

South  Atlantic 

156 

77 

78 

1 

49.3 

9 

1 

South  Central 

120 

40 

80 

0 

33.3 

3 

5 

North  Central 

709 

525 

182 

o 

74.0 

25 

2 

Northwestern 

515 

387 

125 

3 

75.1 

26 

3 

Southwestern 

252 

95 

153 

4 

37.7 

16 

5 

249 

67 

178 

4 
17 

26.9 

22 

1 

Total  United  States 

3196 

1690 

1489 

2.95 

205 

20 

145 

109 

35 

1 

75.2 

19 

0 

20 

Total     .     . 

3341 

1799 

1524 

18 

53.9 

224 

Considering  first  the  present  ownership  of  the 
works,  it  will  be  seen  from  the  summary  by  groups 
at  the  end  of  Table  III.,  that  the  New  England  and 
South  Atlantic  States  are  about  equally  divided  in 
ownership  ;  that  the  Middle,  South  Central,  South- 
western, and  Pacific  States  have  a  decided  tendency 
toward  private  ownership,  while  the  North  Central 
and  Northwestern  groups  have  an  equally  decided 
contrary  bent.  The  extremes  are  the  Pacific  States, 
with  only  26.9  per  cent  of  public  works,  and  the 
Northwestern,  with  75.1  per  cent. 

In  many  instances  one  or  more  States  within  a 
group  are  at  direct  variance  with  the  group  as 
a  whole.     Thus,  in  New  England,  with  ownership 


WATER -WORKS. 


25 


almost  equally  divided  between  the  two  classes, 
Maine  has  but  12.3  per  cent  of  public  works,  and 
Massachusetts  has  74.8  per  cent.  Similar  diver- 
gences may  be  seen  in  the  other  groups  by  exam- 
ining Table  III. 

For  convenience  in  studying  ownership  by  States 
the  percentages  of  public  works  have  been  ar- 
ranged from  least  to  greatest  in  Table  IV.,  which 
needs  no  discussion. 


TABLE 

rv. 

Percentage  of  Public  "Water- Works  in  each  State. 

.     .      0.0 

New  Hampshire 

.    45.3 

.     .      0.0 

Washington .     . 

.    49.0 

.      7.1 

Kansas      .     .     . 

.    49.4 

New  Mexico 

.     10.0 

Oklahoma     .     . 

.    50.0 

.     12.3 

Virginia   .     .     . 

.    50.0 

Montana  .     .     . 

.     12.5 

New  York     .     . 

.    50.3 

California     .     . 

.     15.7 

West  Virginia  . 

.    52.1 

.     20.0 

Utah     .... 

.    54.5 

Arkansas .     .     . 

.     20.0 

Wisconsin     .     . 

.    60.9 

Pennsylvania     . 

.     .    23.9 

Wyoming      .     . 

.    61.5 

Connecticut  .     . 

.     25.4 

Vermont  .     .     . 

.    63.0 

.    26.3 

Colorado  .     .     . 

.     63.2 

North  Carolina 

.    27.7 

Indiana    .     .     . 

.    63.9 

Louisiana      .     . 

.    30.0 

Georgia    .    .     . 

.    72.2 

Alabama  .     .     . 

.     .    31.0 

South  Dakota  . 

.    74.2 

Maryland      .     . 

.    31.0 

Massachusetts  . 

.    74.8 

Florida     .     .     . 

.    31 .0 

Ohio     .... 

.    76.5 

Mississippi    .     . 

.    33.3 

Illinois      .     .     . 

.     78.6 

South  Carolina 

.    33.3 

North  Dakota  . 

.    80.0 

Missouri   .     .     . 

.    33.8 

Michigan .     .     . 

.    80.8 

Kentucky     .     . 

.    34.0 

Iowa     .... 

.    82.4 

Tennessee     .     . 

.    35.7 

Delaware .    .    . 

.    85.7 

New  Jersey  .     . 

.     37.6 

Minnesota     .     . 

.    87.1 

Rhode  Island    . 

.     40.0 

Nebraska .     .     . 

.    87.9 

Oregon     .     .     . 

,    405 

District  of  Columt 

ia,  100.0 

26  MUNICIPAL   MONOPOLIES. 

Changes  from  private  to  public  ownership  dur- 
ing the  century  have  numbered  205  works,  and 
reverse  changes  but  20,  all  as  shown  by  States  in 
Table  III.  Had  there  been  no  changes  in  owner- 
ship, the  number  of  public  works  would  now  be 
about  1,500,  and  the  number  of  private  works 
about  1,675.  Nearly  one-eighth  of  all  the  private 
works  built  have  therefore  changed  to  public  own- 
ership while  only  about  one  seventy-fifth  of  the 
public  works  have  changed  to  private  ownership. 
Kentucky,  Kansas,  and  Texas  are  the  only  States 
reporting  more  than  one  change  from  public 
ownership,  the  twenty  changes  being  in  fifteen 
States,  and  the  remaining  States  reporting  no 
change. 

On  the  other  hand,  the  205  changes  from  private 
to  public  ownership  have  been  made  in  thirty-six 
States,  Massachusetts  showing  29  such  changes, 
and  New  York  26.  As  Massachusetts  has  less 
than  half  as  many  works  as  New  York,  its  changes 
are  far  more  significant.  Without  these  changes 
Massachusetts  would  jiow  have  eighty-four  public 
and  sixty-seven  private  works,  showing  that  over 
40  per  cent  of  the  works  built  by  private  com- 
panies in  Massachusetts  have  given  way  to  public 
ownership.  In  the  whole  of  New  England  there 
have  been  fifty-three  changes  from  private  to 
public  ownership,  or  over  one-fifth  of  the  private 
works  built  have  given  way  to  public.     Other  in- 


WATER -WORKS.  27 

teresting  comparisons  may  be  drawn  from  the  right- 
hand  columns  of  Table  III. 

The  previous  discussion  regarding  ownership 
has  been  based  entirely  on  numbers  of  works.  If 
the  relative  populations  supplied  by  public  and 
private  works  were  available,  the  showing  would 
be  far  more  surprising.  For  the  country  as  a 
whole,  the  latest  reliable  figures  for  population 
are  those  of  the  census  of  1890.  To  estimate  the 
present  population  of  more  than  3,000  cities  and 
towns  is  entirely  out  of  the  question.  The  popu- 
lation supplied  by  public  works  in  1890  was  66.2 
per  cent  of  the  total  population  in  municipalities 
having  water-works  facilities,  or  15,019,000  out  of 
22,678,000.  In  the  last  six  years  the  percentage 
has  doubtless  held  its  own,  if  not  materially  in- 
creased; the  net  gain  in  public  works  being  800, 
against  400  private,  while  many  of  the  works  con- 
tributing to  this  greater  gain  in  public  ownership 
hav,e  been  in  cities  of  fair  size,  the  largest  being 
Syracuse,  N.Y.,  and  Kansas  City,  Mo. 

Of  the  fifty  largest  cities  in  the  United  States, 
twelve  have  always  owned  their  works,  nineteen 
have  changed  from  private  to  public  ownership, 
and  only  nine  are  now  dependent  upon  private 
companies  for  their  supply,  these  nine  being  as 
follows :  San  Francisco,  New  Orleans,  Omaha, 
Denver,  Indianapolis,  New  Haven,  Paterson,  Scran- 
ton,  and  Memphis.     The  New  Orleans  works  were 


28  MUNICIPAL   MONOPOLIES. 

once  bought  by  the  city,  and  after  a  few  years  sold 
again  to  a  company.1 

Canada  shows  a  stronger  belief  in  municipal 
ownership  of  water-works  than  the  United  States. 
Table  III.  gives  the  total  number  of  works  in 
Canada  as  145,  of  which  109,  or  75.2  per  cent, 
are  owned  by  the  public.  There  have  also  been  a 
large  number  of  changes  of  ownership  in  Canada, 
all  from  public  to  private.  Of  fifty-four  private 
plants  recorded  as  having  been  built,  nineteen,  or 
over  one-third,  have  been  bought  by  the  munici- 
palities in  which  they  were  located. 

In  both  the  United  States  and  Canada  there  are 
at  the  present  time  many  cities  and  towns  proposing 
to  establish  municipal  works,  either  by  purchase 
of  existing  private  plants  or  by  the  construction  of 
competing  works. 

The  practice  of  the  various  States  in  this  matter 
of  securing  municipal  works  where  private  plants 
already  exist  is  very  interesting,  partly  because  of 
the  divergences  that  exist.  In  Massachusetts,  the 
municipalities  never  attempt,  at  least  in  late  years, 
to  build  works  to  compete  with  private  plants.  In 
the  case  of   cities  and  towns  having  companies 

1  A  detailed  list  of  changes  in  ownership,  including  the  year 
of  change,  the  year  works  were  huilt,  and  the  population  of  the 
place  in  which  the  works  are  located,  is  given  in  the  introduction 
to  "The  Manual  of  American  Water- Works"  for  1897,  edited  hy 
the  author.  In  the  hody  of  the  Manual  additional  details  regard- 
ing many  of  the  changes  are  given. 


WATER -WORKS.  29 

operating  under  old  charters,  the  common  practice 
is  for  the  city  to  assume  control  of  private  works 
immediately  after  voting  to  buy  the  same,  the  price 
to  be  paid  by  the  city  for  the  works  being  deter- 
mined later  by  arbitrators  appointed  by  the  courts 
of  the  State,  the  appointing  court  having  power 
to  approve  or  disapprove  of  the  price  fixed  by  the 
commissioner. 

In  New  York  and  Pennsylvania  the  respective 
courts  have  rendered  decisions  contrary  to  each 
other  regarding  the  building  of  competing  works 
by  a  municipality.  The  New  York  courts  have 
decided  that  a  city,  in  granting  a  franchise  for 
water-works,  does  not  debar  itself  from  erecting 
and  operating  a  plant;  while  the  Pennsylvania 
courts  have  given  a  contrary  opinion.  In  both 
States,  certain  classes  of  municipalities,  if  not  all, 
seem  to  possess  the  right  to  buy  private  works  at 
an  appraised  valuation. 

Several  States  have  passed,  or  tried  and  failed 
to  pass,  laws  providing  that  no  municipality  sup- 
plied with  water  by  a  private  company  shall  build 
works  without  first  buying  the  property  of  the 
company.  Such  a  law  has  failed  to  pass  once  or 
twice  in  the  Pennsylvania  legislature.  The  Mon- 
tana legislature  passed  such  a  law,  but  it  has  been 
declared  unconstitutional  by  the  courts  of  that 
State. 

Other  States   have  had  bonded  debt  limits  or 


30  MUNICIPAL  MONOPOLIES. 

prohibitions  that  have  prevented  municipal  own- 
ership of  water-works,  either  through  construction 
or  purchase.  On  the  other  hand,  some  States  have 
made  it  particularly  easy  for  municipalities  to  buy 
works ;  Indiana,  for  instance,  authorizing  the  con- 
struction of  works  by  companies,  with  the  distinct 
understanding,  or  contract  provision,  that  the  city, 
through  annual  payments  to  the  company,  should 
become  owners  of  the  works  at  stated  times. 

From  the  foregoing  it  is  evident  that  the  desire 
for  municipal  ownership  of  water-works  is  very 
strong  at  present,  and  that  the  number  of  public 
plants  has  been  increasing  largely  of  late.  From 
the  early  part  of  the  century  a  large  percentage  of 
the  total  number  of  works  have  been  owned  by 
municipalities,  and  more  than  half  of  the  works  are 
now  so  owned.  As  cities  increase  in  size,  muni- 
cipal ownership  seems  to  become  inevitable ;  but 
hosts  of  small  places  have  built  works,  instead  of 
relying  on  private  capital,  and  many  small  towns 
have  bought  out  companies.  The  indications  now 
are  that  municipal  ownership  of  water-works  will 
increase  for  some  time  to  come ;  and  that,  through 
changes  to  public  ownership  in  many  of  the  large 
places  still  supplied  by  companies,  only  a  small 
percentage  of  the  total  population  dependent  on 
water-works  will,  in  a  few  years,  look  to  private 
companies  for  their  supply. 


WA  TEB  -  WORKS.  31 

THE   PROPER   BASIS    OF   PRIVATE    OWNERSHIP. 

Whatever  may  be  one's  ideas  regarding  the  rela- 
tive advantages  of  private  and  public  ownership, 
the  fact  that  both  exist,  and  will  continue  to  exist 
in  varying  proportions,  makes  it  desirable  to  con- 
sider the  proper  basis  of  each. 

From  the  standpoint  of  the  water-users  the  essen- 
tials are  good  service  and  low  cost.  How  can  these 
best  be  secured  under  each  form  of  ownership? 
Considering  private  wTorks  first,  it  is  evident  that 
a  city  or  town  must  previously  guard  its  interests 
in  the  granting  of  a  proper  franchise,  and  next  see 
to  it  that  the  conditions  of  the  franchise  are  ful- 
filled. 

What  are  the  elements  of  a  proper  franchise  ? 
The  fundamental  principle  involved  is  that  the 
water-works  franchise  confers  upon  private  parties 
the  right  to  dig  up,  occupy,  and  use  streets  con- 
structed and  maintained  at  public  expense,  thus 
interfering  more  or  less  with  the  use  of  the  public 
highway  for  street  traffic.  Further  than  this,  the 
right  to  use  the  streets  is  accompanied  by  the  right 
to  do  so  for  private  gain,  through  the  collection  of 
rentals  for  water  furnished.  On  the  other  hand, 
the  recipients  of  such  franchises  place  themselves 
under  obligations  to  supply  water  for  public  and 
private  purposes,  thus  making  themselves  public 
servants. 


32  MUNICIPAL   MONOPOLIES. 

If  a  franchise  is  a  valuable  privilege  granted  by 
a  city  or  town,  and  if  its  acceptance  carries  with 
it  obligations  on  the  part  of  the  grantees,  it  follows 
that  these  obligations  should  be  commensurate  with 
the  privileges.  Obviously  they  cannot  be  fixed, 
or  justly  fixed,  for  all  time,  owing  to  rapidly  chan- 
ging conditions.  Franchises,  therefore,  should  not 
only  be  drawn  with  an  idea  of  securing  adequate 
return  to  both  sides,  but  for  limited  periods,  in 
order  that  readjustment  may  be  made  from  time 
to  time.  In  other  words,  a  water-works  or  any 
other  franchise,  involving  the  use  of  the  public 
streets,  should  be  considered  as  a  lease,  rather  than 
a  sale,  or,  as  is  far  too  often  the  case,  an  out-and- 
out  gift.  The  life  of  a  water-works  franchise,  and 
various  local  conditions,  may  also  vary.  The  less 
control  the  terms  of  a  franchise  reserve  to  the  city, 
in  tile  way  of  regulation  of  rates,  character  of  ser- 
vice rendered,  and  right  of  buying  out  the  company, 
the  shorter  should  be  the  life  of  the  franchise. 
Generally  speaking,  twenty-five  years  may  be  con- 
sidered as  a  long  franchise  under  any  conditions 
approaching  the  normal. 

The  stipulations  regarding  the  character  of  ser- 
vice to  be  rendered  are  largely  both  local  and 
engineering  matters,  to  be  determined  by  the  exi- 
gencies of  each  case.  A  general  idea  of  the 
functions  of  a  water-works  plant  has  already  been 
outlined  in  the  preceding  pages. 


WATER -WORKS.  33 

It  seems  almost  needless  to  say  that  all  the  con- 
ditions of  a  franchise  should  be  plainly  stated,  so  as 
to  leave  as  little  chance  as  possible  for  differences 
of  interpretation.  Ambiguity  and  indefiniteness 
are  seeds  from  which  spring  annoying  and  expen- 
sive crops  of  litigation,  neither  city  nor  company 
being  willing  to  acknowledge  itself  in  the  wrong. 

The  rates  for  public  and  private  service  should 
be  very  definitely  and  plainly  set  forth  in  all  fran- 
chises, or  the  contracts  supplementary  to  those  doc- 
uments. It  is  highly  desirable  for  all  parties  that 
the  rates  be  fair  to  both  sides,  for  obviously  good 
service  cannot  be  rendered  without  a  proper  return 
to  capital;  and  neither  public  nor  private  consu- 
mers will  rest  contented  if  a  well-founded  belief 
gets  abroad  that  the  rates  are  too  high. 

The  only  proper  basis  for  both  public  and  pri- 
vate rates  is  the  cost  of  service  rendered,  including 
operating  expenses  and  capital  charges.  Publicity 
of  accounts  is  the  only  means  of  maintaining  rates 
on  any  such  basis.  Much  educative  work  must 
yet  be  done  before  water  rates  will  be  established 
in  this  way,  as  a  universal  practice.  Meantime  the 
secretive  policy  now  followed  will  continue  to  breed 
suspicions  of  huge  profits,  with  demands  for  lower 
rates  on  every  possible  occasion.  The  people  fail- 
ing in  such  demands,  there  will  continue  as  hereto- 
fore threats  or  attempts  to  annul  franchises  on  the 
ground  of  legal  flaws. 


34  MUNICIPAL   MONOPOLIES. 

Franchise  provisions  for  the  regulation  of  rates 
are  sometimes  made  with  advantage,  but  there  are 
difficulties  and  uncertainties  in  carrying  them  into 
effect.  If  a  franchise  expires  at  the  end  of  fifteen 
or  twenty  years,  the  company  will  see  that  its  re- 
newal is  not  overlooked  by  the  city  council ;  and 
if  the  rates  are  to  be  readjusted  merely,  the  com- 
pany is  not  to  be  blamed  if  it  fails  to  urge  the 
adoption  of  a  new  schedule,  and  city  councils  are 
at  times  wonderfully  apathetic  in  these  matters. 

Above  all  things,  when  an  attempt  is  made  to 
fix  the  water  rates  in  a  franchise,  specific  figures 
should  be  named,  instead  of  inserting  some  "  will 
o'  the  wisp "  provision  for  rates  not  to  exceed 
those  in  some  other  city  or  cities.  Water  rates  in 
most  cities,  under  either  public  or  private  owner- 
ship, are  fixed  in  an  unscientific  way,  and  vary  so 
much  in  method  of  readjustment  as  to  make  aver- 
ages difficult  or  impossible,  according  to  the  num- 
ber and  character  of  the  works  to  be  included  in 
the  average. 

Assuming  the  proper  franchise  in  existence,  it 
was  stated  above  that  it  is  necessary  to  enforce  its 
provisions.  It  should  be  remembered  that  there 
are  mutual  obligations  here,  and  that  the  city  should 
live  up  to  its  agreements  if  the  company  is  ex- 
pected to  do  the  same.  Generally  speaking,  how- 
ever, the  main  obligations  assumed  by  the  city  are 
payments  for  the  various  public  services  rendered, 


WATER -WORKS.  35 

obligations  so  obvious  to  all,  and  the  fulfillment  of 
them  so  imperative  to  the  life  of  the  company,  that 
attempts  to  evade  them  have  little  chance  of  suc- 
cess, except  when  the  company  has  not  fulfilled 
its  contract,  or  when  the  franchise  is  weakened  by 
legal  flaws.  The  obligations  of  the  company  are 
so  various,  and  hinge  on  so  many  technicalities  of 
law  and  engineering,  that  it  is  often  no  easy  matter 
to  determine  them  with  exactness,  much  less  to 
enforce  them  fully  and  impartially.  Generally 
speaking,  the  engineering  questions  all  center 
around  the  quality  and  sufficiency  of  the  supply, 
using  the  word  sufficiency  to  designate  both  quan- 
tity and  pressure ;  while  the  legal  questions  relate 
to  the  interpretation  of  the  meaning  of  the  con- 
tract and  various  technicalities.  Good  engineer- 
ing and  legal  advisers  should  be  employed  by  the 
city  to  determine  clearly  and  protect  fully  its  in- 
terests, and  the  advice  should  be  followed  with 
promptness  and  vigor.  The  strongest  safeguard 
of  either  public  or  private  rights  is  the  knowledge 
that  no  pains  will  be  spared  to  determine  and  en- 
force them.  Too  many  cities  let  all  franchise 
matters  drag  on  loosely  until  complaints  against 
companies  become  so  frequent  and  pronounced 
that  they  can  no  longer  be  ignored.  At  this  junc-- 
ture  the  too  common  practice  is  either  to  make  a 
mere  feint  at  probing  the  trouble,  or  to  go  about 
it  in  a  bull-headed  and  antagonistic  way.     Most 


36  MUNICIPAL  MONOPOLIES. 

franchise  companies  wish  to  avoid  irritation  and 
conflict ;  but  all  will  resist  attempts  to  drive  them, 
whatever  the  question  at  issue,  preferring  to  yield 
even  a  big  point  rather  than  be  driven  to  perform 
some  small,  obvious  duty. 

Of  course  there  are  dishonest  city  officials,  who 
prefer  to  connive  with  companies  to  their  own  cor- 
rupt personal  gain,  rather  than  encourage  or  force 
them  to  conform  their  actions  to  the  public  good ; 
and  there  are  unprincipled  companies  willing  to 
meet  such  city  officials  half  way,  or  more.  There  are 
also  ignorant  and  headstrong  persons  on  each  side. 
Public  sentiment  must  be  educated  to  make  all 
these  undesirable  facts  things  of  the  past.  In  the 
final  analysis  the  whole  matter  of  good  city  service, 
be  it  water-works  or  otherwise,  depends  upon  the 
people  who  select,  or  by  staying  away  from  the 
polls  fail  to  select,  their  public  servants.  Munici- 
pal misrule  and  poor  service  depend  more  on  men 
than  on  methods.  The  man  who  stands  ready  to 
secure  personal  advantages  or  profit  to  the  detri- 
ment of  those  whom  he  has  been  chosen  to  serve 
will  not  be  at  all  particular  whether  he  does  this 
through  public  or  private  ownership  of  municipal 
monopolies. 

THE   PROPER    BASIS    OF    PUBLIC    OWNERSHIP. 

Some  of  the  earliest  water-works  plants  of  the 
country  consisted  of  a  small  and  short  pipe-line 


WA  TER  -  WORKS.  37 

from  a  spring  on  the  hillside  to  a  few  houses  be- 
low it.  Those  supplied  with  water  —  "  running 
water,"  as  it  was  designated  with  much  pride  and 
satisfaction — contributed  equally  to  the  cost  of 
construction  and  the  small  expense  necessary  to 
maintenance.  Similar  pipe-lines,  or  aqueducts  as 
they  were  called  in  the  early  days,  are  still  in  use 
in  many  small  villages  in  hilly  or  mountainous 
sections  abounding  with  springs.  The  water  sup- 
ply in  such  cases  is  purely  a  co-operative  affair, 
each  paying  his  proper  share  of  the  expense  in- 
volved, and  no  attempt  being  made  to  realize  a 
profit  for  the  benefit  of  any  one. 

A  modern  water-works  plant  owned  by  a  city 
is,  or  should  be,  but  an  expansion  of  this  co-oper- 
ative idea,  rendered  somewhat  more  complex  be- 
cause of  the  demands  of  the  consumers  for  varying 
quantities  of  water,  and  by  the  fact  that  the  muni- 
cipality itself  is  also  a  consumer.  But  the  dif- 
ference is  principally  one  of  detail.  The  same 
principles  of  construction  and  operation  govern 
as  under  private  ownership,  and  each  kind  of 
ownership  is  dependent  upon  good  business  man- 
agement for  success.  The  great  dangers  of  public 
ownership  are  (1)  that  political  rather  than  busi- 
ness methods  may  dominate,  and  (2)  that  the  cost 
of  supplying  water  will  not  be  properly  divided 
between  public  and  private  consumers.  The  latter 
danger  also  pertains  to  private  ownership ;  since 


434605 


38  MUNICIPAL  MONOPOLIES. 

companies  secure  their  revenues  where  they  meet 
with  the  least  resistance,  and  will  agree  to  accept 
a  low  hydrant  rental  where  they  can  suit  them- 
selves in  the  matter  of  private  rates,  or  vice  versa. 
Under  public  ownership  some  cities  collect  little 
or  nothing  in  the  general  tax  levy  for  the  support 
of  the  water-works,  covering  the  whole  expense 
by  the  rates  charged  private  consumers;  while  in 
others  the  pressure  for  low  private  rates  results  in 
meeting  nearly  all  the  water  expenses  by  general 
taxation.  It  must  also  be  borne  in  mind  that  polit- 
ical parties  and  franchise  companies  often  have  a 
strong  blending  of  interests. 

A  water-works  plant  owned  by  a  municipality 
should  be  as  truly  self-supporting  as  one  owned 
by  a  private  company;  and  those  benefited  by  the 
water  supply  should  foot  the  bills,  each  in  his 
proper  proportion,  as  much  under  one  plan  of 
ownership  as  under  the  other. 

As  stated  in  the  introductory  chapter,  the  cry 
that  water  should  be  free  as  air  is  a  delusion.  It 
cannot  be  supplied  to  a  city  without  expense,  and 
the  expense  must  be  met  in  some  way.  The  mu- 
nicipality, under  either  plan  of  ownership,  should 
see  that  this  expense  is  properly  distributed,  both 
among  different  private  consumers  and  the  general 
public.  The  latter  is  benefited  by  the  water  used 
or  available  for  fire  protection,  and  by  the  amount 
consumed  in  watering  streets  and  parks,  flushing 


WATER -WORKS.  39 

sewers,  and  supplying  public  fountains  and  pub- 
lic buildings.  The  proper  proportions  of  cost  to 
be  met  by  the  public  and  private  consumers, 
and  the  subdivisions  of  each,  are  matters  for  en- 
gineers and  water  meters  to  decide.  The  latter 
will  indicate  the  relative  amounts  actually  con- 
sumed by  classes  or  individuals ;  but  the  cost  of 
the  public  service  depends  far  less  upon  the  total 
consumption  in  a  year  than  upon  the  comparatively 
vast  quantities  which  may  be  demanded  on  special 
brief  occasions,  principally  at  fires.  Thus  the  use 
of  water  for  all  public  purposes  may  be  not  over 
five  per  cent  of  the  total  consumption  for  the  year, 
but  the  whole  system  must  be  so  proportioned  as 
to  be  capable  of  delivering  an  enormous  increase 
of  volume  during  a  severe  conflagration.  Operat- 
ing expenses  may  be  increased  but  slightly  on  this 
account,  but  first  cost  and  capital  charges  may  be 
much  more  than  doubled. 

The  necessity  of  conducting  municipal  water- 
works on  a  strictly  business  basis,  if  the  best  re- 
sults are  to  be  obtained,  was  mentioned  above  in 
connection  with  the  danger  that  the  cost  of  service 
will  not  be  properly  distributed  among  those  bene- 
fited. It  would  be  hard  to  say  anything  new  on 
this  subject,  and  it  has  already  been  commented 
on  in  the  previous  section.  Its  importance  is  more 
fully  recognized  by  word  than  by  deed,  but  the 
strong  wave  of  municipal   reform  now  sweeping 


40  MUNICIPAL  MONOPOLIES. 

over  the  country  will  have  its  good  effect  here  as 
elsewhere. 

ADVANTAGES    OF    PRIVATE    OWNERSHIP. 

There  is  undoubtedly  much  to  be  said  on  both 
sides  of  the  subject  when  the  relative  advantages 
of  private  and  public  ownership  are  taken  into 
consideration.  In  this  and  the  succeeding  section 
an  attempt  will  be  made  to  sum  up  as  impartially 
as  possible  the  strongest  points  on  each  side. 

The  greatest  argument  for  private  ownership, 
and  one  that  in  a  measure  includes  all  others,  is 
that  under  it  every  endeavor  is  made  to  conduct 
the  works  in  the  most  prudent  and  economical 
manner,  in  order  to  insure  the  greatest  possible 
return  on  the  capital.  It  is  urged  that  material 
costs  no  more  under  private  ownership,  and  that 
labor  is  generally  much  cheaper,  since  shorter 
hours  and  higher  wages  prevail  among  municipal 
than  among  private  employers.  There  is  undoubt- 
edly much  force  in  the  contention  regarding  wages, 
especially  those  of  unskilled  day  laborers.  The 
ultimate  economy  of  longer  hours  is  at  least  open 
to  question.  On  the  whole,  material  may  cost  pri- 
vate companies  no  more  than  cities  ;  but  it  is  a  no- 
table fact  that  most  contracts  for  city  water-works 
are  awarded  only  after  well-advertised  calls  for 
bids,  and  must  then  be  given  to  the  lowest  bidder. 
Unfortunately,  there  are  deals  and  "  divvies  "  be- 


WATER-WORKS.  41 

tween  city  officials  and  contractors ;  but  there  is 
always  the  danger  of  exposure  and  punishment 
here,  while  the  officials  of  private  companies  can 
make  similar  arrangements  with  contractors  with 
far  less  likelihood  of  being  discovered  or  punished, 
especially  when  new  works  are  being  built  to  un- 
load on  holders  of  securities.  In  the  latter  case, 
construction  companies,  openly  or  secretly  com- 
posed of  the  first  officials  of  the  water  companies, 
often  receive  the  contracts ;  or  works  are  built  by 
supply  men  or  contractors  for  the  sole  purpose  of 
making  as  great  a  profit  as  possible  on  the  material 
and  labor  involved.  The  bulk  of  the  original  con- 
struction, at  least  of  the  public  works,  is  done  by 
contract,  in  which  case  the  question  of  higher 
wages  for  ordinary  labor  is  not  involved.  The  ex- 
ecutive positions  in  private  companies  often  com- 
mand better  pay  than  similar  ones  under  public 
ownership,  but  in  the  long  run  this  is  advanta- 
geous to  the  private  works. 

The  absence  of  political  considerations,  generally 
speaking,  from  the  rnanagement  of  private  works, 
is  undoubtedly  a  great  advantage.  That  they  do 
enter  in  at  times  is  frequently  alleged,  and  doubt- 
less true ;  but,  while  this  is  bad  for  city  govern- 
ment, in  general  companies  go  into  politics  to 
further  their  own  ends,  as,  for  instance,  when  they 
give  employment  to  friends  or  followers  of  politi- 
cians in  return  for  support  from  the  latter  in  se- 


42  MUNICIPAL  MONOPOLIES. 

curing  or  renewing  franchises,  or  in  preventing 
the  enforcement  of  franchises  or  contracts. 

Private  companies  less  often  than  cities  extend 
their  mains  into  sparsely  settled  districts,  where 
new  business  will  not  warrant  the  expense;  and 
they  certainly  will  not  be  accused  of  lowering 
rates  unduly  for  political  effect,  as  cities  some- 
times do. 

One  of  the  most  common  objections  to  municipal 
ownership  is  the  allegation  that  under  it  there  is 
constant  change  in  the  personnel  of  the  officials  in 
charge  of  the  water-works.  So  far  as  I  know,  this 
claim  has  never  been  either  disproved  or  proved  by 
actual  investigation  of  records,  being  put  forward, 
like  so  many  others,  on  general  impressions.  I 
have  been  at  great  pains  to  get  some  facts  bearing 
directly  on  this  subject,  and  find  that  such  records 
as  I  have  composed  support  the  claim,  although 
not  so  strongly  as  I  had  expected  at  the  start. 
My  study  is  based  on  only  one  class  of  officials, 
water- works  superintendents.  This  class  was  se- 
lected because  it  stands  more  nearly  on  the  same 
footing  than  any  other  in  both  private  and  public 
plants,  and  is  more  universal.  The  study  is  based 
on  the  names  given  in  "  The  Manual  of  Ameri- 
can Water-Works  "  for  1897,  as  a  basis,  compared 
with  those  in  the  Manual  for  1890-1891,  and  the 
"Statistical  Tables  of  American  Water- Works  " 
for  1887  and  1883,  the  returns  of  names  of  super- 


WATER-WORKS. 


43 


intendents  in  each  book  covering  respectively  the 
years  1896,  1891,  1886,  and  1882,  as  nearly  as 
possible,  thus  giving  approximately  5,  10,  and  14 
year  periods.  As  we  go  back  in  years  the  number 
of  works  in  existence  decreases  very  rapidly,  and 
some  works  are  found  for  which  the  names  of  the 
superintendents  are  not  given.  This  accounts  for 
the  fact  that  the  total  number  of  works  involved 
in  the  5-year  period  is  901 ;  in  the  10-year,  399 ; 
and  in  the  14-year  only  269.  These  works  are  dis- 
tributed throughout  the  whole  of  the  United  States, 
but  include  no  Canadian  plants.  The  changes  in 
the  various  periods  are  given  in  Table  V. 

TABLE   V.       Changes   in   Superintendents   of   Water-Works 
Plants,  1891-1896,   1886-1896,  and  1882-1896. 


1891-1896, 
1886-1896, 

1882-1896, 

Companies. 

Cities. 

Total 
Reporting. 

Per  Cent 

Change. 

No 
Change. 

Change. 

No 
Change. 

Co's. 

Cities. 

204 

112 

71 

332 

72 
36 

198 
148 
125 

167 
67 
37 

901 
399 
269 

38 
60 
66 

54 

69 

77 

The  figures  for  the  5-year  period  cover  nearly 
half  of  the  works  in  operation  in  1891,  or  901 
out  of  2,037.  Of  the  536  companies  included, 
only  38  per  cent  changed  their  superintendents  in 
this  time ;  while  of  365  public  works,  198,  or  54 
per  cent,  displaced  old  with  new  men.  The  two 
other  periods  show  much  less  relative  change,  60 
per  cent  of  the  companies,  and  69  per  cent  of  the 


44  MUNICIPAL  MONOPOLIES. 

cities,  changing  in  the  10-year  period,  and  66  per 
cent  of  the  companies,  and  77  percent  of  the  cities, 
changing  in  the  14-year  period. 

These  figures,  like  all  similar  ones,  should  be 
used  with  caution.  They  can  be  accepted  as  show- 
ing the  general  relative  tendency  to  change  super- 
intendents under  each  plan  of  ownership,  in  each 
period ;  but  comparisons  of  periods  might  be  mis- 
leading for  several  reasons.  It  would  be  interest- 
ing to  compare  the  figures  by  periods  for  those 
works  only  for  which  the  superintendents  are 
given  in  each  of  the  four  publications  used  in 
making  up  the  data ;  but  as  the  number  of  such 
works  must,  of  necessity,  be  less  than  269,  the 
number  for  the  14-year  period,  and  as  the  result 
would  probably  not  throw  any  great  light  on  the 
subject,  the  task  was  not  undertaken. 

Works  great  and  small  were  included  in  the 
above  summary;  and  no  account  was  taken  of 
changes  in  the  other  officers  of  the  several  plants, 
or  change  of  financial  or  political  control  in  the 
case  of  private  and  public  works,  respectively. 

In  conclusion,  this  question  may  be  left  to  the 
consideration  of  the  reader :  Supposing  it  could  be 
satisfactorily  proven,  by  exhaustive  statistics,  that 
a  private  company  can  build  and  operate  water- 
works at  less  expense  to  itself  than  can  a  munici- 
pality, to  whom  does  the  benefit  accrue,  the  water 
consumers,  or  the  holders  of  the  company's  stock  ? 


WATER -WORKS.  45 


ADVANTAGES   OF   PUBLIC    OWNERSHIP. 

One  of  the  most  obvious  advantages  of  public 
ownership  is  lower  capital  charges.  A  municipal- 
ity can  float  bonds  at  a  lower  rate  of  interest  than 
a  private  company,  since  the  whole  assessable  prop- 
erty of  the  town  is  generally  liable  for  the  pay- 
ment of  interest  and  principal,  while  a  company 
can  give  security  only  on  the  works.  Besides  this, 
the  company  seeks  to  pay  as  high  dividends  as  pos- 
sible on  its  capital  stock ;  while  the  municipality 
need  only  pay  the  interest  on  its  bonds,  and  may 
turn  any  profit  above  this  and  operating  expenses 
into  the  general  treasury,  to  help  meet  other  ex- 
penses, or  else  lower  the  water  rates.  Furthermore, 
it  is  no  uncommon  thing  for  a  company  to  bond  a 
plant  nearly  up  to  its  actual  cost,  and  then  issue 
stocks  to  an  equal  amount,  on  which  it  attempts 
to  pay  dividends.  Thus,  even  if  a  municipal 
plant  were  actually  to  cost  more  than  a  private  one, 
its  capital  charges,  in  most  cases,  would  probably 
be  less.  The  chances  that  municipal  plants  will 
actually  cost  more  are  diminished  by  the  public 
lettings  of  bids,  which  often  result  in  great  com- 
petition and  low  prices.  Seldom  is  private  work 
publicly  advertised,  thus  affording  rare  opportunity 
for  "  deals." 

Another  advantage  of  city  ownership  is  that  no 
taxes  are  levied  by  the  city  on  its  own  property, 


46  MUNICIPAL  MONOPOLIES. 

and  hence  this  item  of  expense  is  eliminated.  It 
is  true  that  the  property  of  private  water  companies 
often  escapes  taxation,  or  is  taxed  lightly,  but  some 
tax  is  generally  levied ;  and  the  fact  is  always  at 
hand  for  use  as  an  argument  on  the  part  of  the 
company  when  lower  rates  are  proposed. 

Under  municipal  ownership  a  harmonious  devel- 
opment of  this  and  other  public  works  is  possible. 
Water-mains  may  be  laid  before  streets  are  paved, 
thus  saving  the  damage  and  expense  of  tearing  up 
good  pavement  to  lay  water-pipes.  The  health 
and  police  departments  may  easily  work  with  the 
water  department  for  the  public  good,  instead  of 
the  water  company  being  continually  fearful  lest 
the  health  board  declare  its  water  insanitary,  and 
being  too  often  ready  to  resist  efforts  to  secure  a 
better  supply. 

Less  friction  between  consumers  and  purveyor 
is  developed  under  public  than  under  private  own- 
ership ;  the  consumer  feeling  that  the  city  water 
department  is  the  servant,  but  that  the  water  com- 
pany is  its  master.  This  lesser  amount  of  friction 
makes  the  introduction  of  meters  sometimes  easier 
under  public  ownership ;  although,  where  these 
devices  are  very  unpopular,  municipal  officers  are 
more  likely  than  private  companies  to  yield  to  the 
clamor  against  meters,  and  defer  the  introduction 
of  this  desirable  system  of  selling  water. 

Better  hours  and  wages  are  claimed  by  some  as 


WA  TER  -  WORKS.  47 

one  of  the  great  advantages  of  municipal  owner- 
ship. While  there  is  doubtless  much  ground  for 
this  claim,  it  is  often  true  that  the  higher  wages 
and  shorter  hours  are  given  as  political  sops,  rather 
than  for  any  better  reason ;  and  that  under  such 
conditions  the  wage-earners  may  be  degraded  rather 
than  benefited,  while  the  water  is  thus  made  more 
expensive  for  the  consumers. 

There  is  no  reason  why  a  municipality  cannot 
build  and  operate  water-works  as  cheaply  as  a  com- 
pany, and  it  can  almost  invariably  raise  the  ne- 
cessary capital  at  a  lower  rate  of  interest.  If  a 
municipality  does  not  succeed  as  well  as  a  company 
in  these  particulars,  it  is  due  to  political  favor- 
itism, corruption,  incompetency,  or  negligence  on 
the  part  of  the  public  officials,  more  largely  than 
to  anything  else.  If  officials  capable  of  any  or  all 
of  these  vices  are  allowed  to  get  into  office,  they 
will  be  pretty  sure  to  yield  to  them  under  any 
plan  that  may  be  devised  for  supplying  the  wants 
of  the  people.  The  city  official  who  would  enrich 
himself  at  public  expense  through  contracts  for 
building  or  maintaining  a  municipal  water,  light- 
ing, or  street-railway  plant,  will  not  be  slow  to  be- 
tray his  trust  to  a  private  company  performing  the 
same  service,  either  through  the  passing  of  too 
liberal  franchises,  or  the  failure  to  enforce  those 
which  properly  protect  the  interests  of  the  city. 

A  company  once  intrenched  behind  a  franchise 


48  MUNICIPAL  MONOPOLIES. 

or  other  public  privilege,  secured  through  either 
political  favoritism  or  bribery,  cannot  easily  be 
dislodged,  owing  to  the  difficulty  of  proving  fraud 
or  corruption.  It  may  therefore  go  on  year  after 
year,  reaping  a  rich  harvest  of  excessive  charges, 
all  in  apparent  legal  form.  A  thieving  city  council 
or  board  of  public  works  may  be  turned  out,  though 
with  herculean  effort,  and  its  plundering  stopped. 
Suppose  a  company  is  seeking  its  franchise,  and 
finds  that  the  rates  it  is  willing  to  accept  will 
bring  it  $5,000  a  year  more  than  those  proposed 
by  the  city  council  of  nine  members.  This  differ- 
ence for  one  year  of  even  a  fifteen-year  franchise, 
judiciously  distributed  among  some  members  of  the 
council,  or  handed  to  the  leader  of  the  dominant 
political  party,  might  secure  a  majority,  and  mean 
$70,000  during  the  life  of  the  franchise.  Suppose, 
instead,  that  municipal  works  are  constructed.  An 
appropriation  cannot  be  voted  in  many  States  until 
plans  and  specifications  have  been  prepared.  These 
are  liable  to  very  close  scrutiny  on  the  part  of  op- 
ponents to  the  project,  and  disappointed  aspirants 
for  the  position  of  engineer.  Then  the  contract 
must  be  let  publicly,  with  hosts,  oftentimes,  of 
jealous  bidders  watching  each  other  and  the  city 
officials.  Supposing  a  steal  does  occur  that  raises 
the  alleged  cost  of  the  works  by  half.  This  is  not 
so  large  an  increase  in  capitalization  as  many  com- 
panies effect  by  stock-watering,  while  the  rate  of 


WA  TEH  -  WORKS.  49 

interest  on  the  city  outlay  would  be  less  than  on 
the  capitalization  of  a  company.  Thus  far,  then, 
the  city  is  in  a  position  to  charge  as  low  rates 
as  the  company  possibly  can  live  under.  Coming 
next  to  operating  expenses,  there  may  be  some  in- 
competency and  some  stealing  here  for  a  few  years 
on  the  part  of  the  city  officials,  and  yet  the  works 
may  be  maintained  without  levying  rates  in  excess 
of  those  that  would  give  the  company  a  fair  re- 
ward on  its  capital,  saving  the  people  the  $5,000 
a  year  for  fourteen  years  which  the  company  would 
have  bought  from  the  city  council  for  one  year  of 
this  excess  revenue.  If,  during  the  last  half  of 
the  fourteen-year  period,  the  city  government  was 
purified,  and  the  incompetence  and  stealing,  as- 
sumed above,  stopped,  then  the  public  would  gain 
all  the  more  ;  but  under  private  ownership  the  com- 
pany would  be  too  well  fortified,  through  long  en- 
joyment of  the  higher  rates,  removal  and  death 
of  the  members  of  the  council  that  granted  the 
franchise,  and  the  general  difficulty  of  proving 
fraud,  for  the  consumers  to  secure  the  reduction 
of  rates.  It  would  produce  its  franchise,  prove  its 
long  and  unquestioned  enjoyment  of  the  rates 
fixed  in  it,  and  defy  proof  of  fraud  in  securing  the 
insertion  of  such  rates  in  the  document ;  and  the 
court  would  uphold  the  company.  Meanwhile, 
through  the  whole  life  of  the  franchise,  the  water 
consumers   would    have   fumed    and  fretted  over 


50  MUNICIPAL  MONOPOLIES. 

what  they  believed  were  exorbitant  rates  and  un- 
just regulations  ;  the  corrupt  council,  during  the 
first  half  of  the  franchise,  would  refuse  to  interpose 
in  behalf  of  the  people  in  matters  of  lower  rates, 
purer  water,  or  anything  else  desired ;  and,  during 
the  last  half,  the  fight  for  these  things  would  be 
doubtful,  if  not  hopeless,  in  result. 

It  is  not  my  intention  to  paint  all  private  com- 
panies black;  I  only  urge  that  "the  pot  must  not 
call  the  kettle  black,"  that  "what  is  sauce  for  the 
goose  is  sauce  for  the  gander ; "  and,  in  general,  as 
is  already  stated,  it  is  not  on  methods,  but  on  men, 
that  we  must  rely  for  good  city  government 

CONCLUSIONS. 

I  have  endeavored  in  the  foregoing  pages  to 
present  some  of  the  most  salient  points  relating  to 
water-works  as  one  of  several  municipal  monopo- 
lies. I  have  not  attempted  to  prove  that  either 
public  or  private  ownership  is  the  best  plan  to  pur- 
sue, but  I  do  not  hesitate  to  say  that  I  believe  in 
municipal  ownership  as  a  general  practice.  I  have 
not  compared  the  cost  of  water  under  the  two 
systems ;  because,  without  going  into  the  subject 
in  great  detail,  such  a  comparison  would  be  very 
misleading.  Water  rates,  both  public  and  private, 
are  on  a  most  unscientific  basis.  If  water,  like 
gas,  were  universally  sold  by  meter,  the  case  would 


WATER -WORKS.  51 

be  different ;  but  even  then  there  would  be  left  for 
consideration  how  the  cost  of  supplying  water  is 
divided  between  the  city,  as  a  whole,  and  private 
consumers,  and  whether  low  rates  for  one  branch 
of  the  service  were  not  offset  by  high  ones  for  the 
other.  Besides  this,  it  may  cost  very  much  more 
to  supply  water  in  one  locality  than  another,  with- 
out regard  to  ownership,  natural  conditions  being 
very  important  factors. 

Certainly  we  need  more  business-like  city  gov- 
ernment than  we  now  have,  whoever  may  own  the 
works;  and  we  need  more  clearly  drawn  fran- 
chises, when  works  are  operated  on  this  plan. 

There  seems  to  be  no  reason  why  an  honest  and 
competent  city  government  cannot  build  and  oper- 
ate works  as  cheaply  as  a  company.  If  it  can,  then 
the  profit  all  companies  expect  to  make  may  go  to 
the  consumers,  besides  which,  the  other  advantages 
of  municipal  ownership  remain  in  its  favor.  If  it 
is  urged  that  city  governments  are  dishonest  and 
incompetent,  then  I  reply  that  the  people  must 
pay  the  penalty  under  private  ownership  as  well 
as  public.  What  benefit  is  it  to  the  water  con- 
sumers if  a  company  can  operate  works  at  less  ex- 
pense than  the  city,  so  long  as  the  difference  goes 
into  the  treasury  of  the  company  instead  of  result- 
ing in  lower  rates  ?  Dishonest  city  governments 
are  not  going  to  force  a  reduction  of  the  rates  of 
private  companies,  if,  indeed,  they  could ;   instead, 


52  MUNICIPAL  MONOPOLIES. 

they  will  take  a  part  of  the  profits  in  return  for 
allowing  the  rates  to  remain  at  the  topmost  notch. 
When  municipalities  control  private  corpora- 
tions, instead  of  the  reverse,  as  was  recently  so 
well  put  by  Dr.  Albert  Shaw  in  the  Independent, 
then  it  will  matter  far  less  than  now  whether 
we  have  private  or  public  water-works.  Water 
rates,  in  those  days,  will  be  kept  down  to  a  point 
where  they  will  yield  a  fair  return  on  capital ;  and 
such  companies  as  then  exist  will  not  be  constantly 
afraid  of  "  strikes"  on  the  part  of  self-seeking  city 
and  State  officials.  There  must  be  just  treatment 
on  both  sides.  Meanwhile,  we  must  have  munici- 
pal reform,  and  we  must  also  have  more  light  on 
the  much  discussed  question  of  ownership  of  nat- 
ural monopolies.  Private  companies,  naturally 
enough,  keep  their  financial  figures  to  themselves ; 
and  the  book-keeping  of  both  public  and  private 
works  is  often  so  poor  that  little  can  be  learned 
from  it  when  available. 


II. 

MUNICIPAL 
ELECTRIC    LIGHTING. 


MUNICIPAL 
ELECTRIC    LIGHTING. 

By  JOHN  R.  COMMONS,  A.M. 
Professor  of  Sociology,  Syracuse  University. 


In  advocating  municipal  electric  lighting,  I  ac- 
cept the  burden  of  proof.  I  agree  that  govern- 
ment, whether  national  or  local,  cannot  safely 
undertake  experiments  on  a  large  scale.  The  as- 
sumption of  new  functions  must  be  shown  to  be 
not  merely  desirable  in  the  interests  of  a  few,  or 
adapted  to  the  doctrinaire  ideal  of  a  well-rounded 
form  of  government,  but  it  must  be  shown  to  be 
necessary  and  essential  for  the  preservation  of  im- 
portant interests  affecting  the  welfare  of  the  entire 
body  of  the  people.  Governments  do  indeed  enter 
upon  experiments,  and  the  assumption  of  a  well- 
established  industry  may  itself  be  called  an  experi- 
ment. But  in  the  sense  in  which  I  use  the  word,  — 
the  introduction  of  new  modes  of  manufacture  or 
service,  and  the  creation  of  new  wants  among  the 
people, — these  are  matters  involving  risks  of  an 
incalculable  and  speculative  kind ;  and  this  is  not 


f)ii  MUNICIPAL   MONOPOLIES. 

safely  the  business  of  government.  Private  par- 
ties should  be  encouraged  to  push  forward  in  all 
the  untried  fields.  If  their  ventures  are  unsuccess- 
ful, if  they  are  ahead  of  their  times,  failure  and 
bankruptcy  will  affect  only  them  and  their  imme- 
diate dependents.  Successors  will  come  in ;  and 
if  the  service  in  question  meets  a  truly  growing 
need  of  the  people,  success  and  fortune  will  follow. 
But  if  government  ventures  upon  the  sea  of  uncer- 
tainty, bankruptcy  means  the  beginning  of  anarchy. 
Government  does  not  perish,  like  the  individual  or 
the  corporation ;  and  failure  on  a  large  scale,  if  it 
involves  repudiation  or  oppressive  taxation  for 
years  to  come,  produces  a  popular  revulsion,  and 
deep-seated  distrust  of  government  itself  in  all  its 
departments. 

A  criticism  should  therefore  be  made  upon  those 
cities  which  entered  upon  municipal  electric  light- 
ing eight  or  ten  years  ago.  Here  was  a  new  agency 
utterly  unknown  as  a  commercial  quantity,  — new 
machinery  of  all  degrees  of  imperfection  and  un- 
certainty ;  cost  of  operation,  depreciation,  risks, 
unsettled  ;  engineering  and  mechanical  requisites 
on  the  part  of  employees  quite  indefinite  ;  public 
opinion  not  yet  crystallized  through  adequate  dis- 
cussion and  experience.  In  the  face  of  all  these 
uncertainties,  it  is  not  strange  if  some  cities  have 
incurred  debts  for  fabulously  priced  machinery 
which   a  few  years  of  experience  have  since  dis- 


MUNICIPAL  ELECTRIC  LIGHTING.  57 

carded,  and  if  the  reaction  has  driven  the  citizens 
to  the  best  kind  of  a  bargain  they  could  make 
with  private  companies.  It  is  reported  that  eight 
or  ten  towns  and  cities  which  had  installed  muni- 
cipal plants  have  abandoned  their  undertakings, 
and  sold  out  to  private  companies  at  a  serious 
loss.  That  the  number  is  so  small,  considering 
that  over  three  hundred  cities  and  villages  are 
reported  to  have  adopted  municipal  ownership, 
certainly  speaks  well  for  the  industrial  ability  of 
our  small  cities.  On  the  other  hand,  the  fact  that 
these  failures  have  not  prevented  an  astonishing 
increase  in  the  number  of  municipal  plants  indi- 
cates some  deep-seated  causes  which  are  worthy 
of  our  attention.  In  the  State  of  New  York  alone, 
the  six  municipal  plants  of  two  years  ago  are  now 
increased  to  twelve,  and  possibly  more. 

Municipal  functions  have  increased  very  slowly. 
Cities  have  accepted  the  principle,  just  as  every 
advocate  must  also  do,  that  the  burden  of  proof  is 
against  the  assumption  of  new  functions.  Natural 
lethargy  and  difficulties  in  the  way  of  co-operative 
action  have  been  important  checks  ;  but  equally  or 
more  important  has  been  that  wise  Anglo-Saxon 
conservatism  which  makes  sure  and  impregnable 
every  acquisition  in  civilization  before  advancing 
to  new  fields.  In  the  matter  of  electric  lighting, 
only  weighty  and  even  vital  considerations  can 
push  forward  the  movement  for  municipal  owner- 


58  MUNICIPAL  MONOPOLIES. 

ship  over  any  extensive  range  of  cities.  As  far, 
however,  as  the  experimental  character  of  the  in- 
dustry is  concerned,  fifteen  years  of  experience 
and  marvelous  inventive  progress  have  reduced 
electric  lighting  to  a  system,  and  made  all  its  parts 
and  details  as  readily  calculable  as  any  of  the 
functions  in  which  cities  are  now  engaged.  The 
rapid  growth  of  cities  themselves,  with  an  assured 
increase  of  demand  for  light  and  power,  combined 
with  the  perfection  of  the  mechanical  equipment 
and  the  fairly  reasonable  competition  between  pro- 
ducers of  the  same,  have  removed  for  the  present 
the  weight  of  any  criticism  similar  to  that  which 
might  attach  to  those  cities  which  ventured  upon 
tins  field  in  the  early  da}-s  of  the  industry.  The 
questions  which  now  present  themselves  to  cities 
considering  the  proposed  operation  of  municipal 
plants  are  therefore  greatly  simplified  by  the  elimi- 
nation of  these  strictly  mechanical  questions.  The 
new  problems  are  of  a  quite  different  character. 
They  may  be  briefly  summarized  under  the  head- 
ings —  improved  service,  diffusion  of  use  among 
the  people,  stimulation  of  industry,  and  purifica- 
tion of  politics.  These  apply  to  all  industries  re- 
quiring a  municipal  franchise,  and,  with  the  growth 
of  a  city,  any  one  or  all  of  them  may  gather  such 
increasing  weight  that  the  city  is  compelled  to  as- 
sume the  operation  of  the  industry  in  question. 
Streets  and  alleys  have,  of  course,  long  since  been 


MUNICIPAL   ELECTRIC  LIGHTING.  59 

municipalized  ;  and  it  would  be  utterly  intolerable, 
even  in  small  villages,  if  vehicles  and  horses  were 
subjected  to  tolls  at  various  street  intersections. 
The  sewerage  system  comes  next  in  urgency. 
Only  three  cities  in  the  United  States  have  private- 
owned  systems  of  sewers.  This  service  must  be 
made  universal,  and  must  be.  of  the  highest  quality 
for  both  poor  and  rich  sections.  It,  therefore,  like 
the  streets,  has  been  municipalized  and  made  en- 
tirely free  of  tolls.  New  Orleans,  with  its  private 
sewers,  is  suffering,  not  only  from  inadequate  sewer 
service,  but  from  corrupt  politics  growing  out  of 
such  service.  Water-works  follow  sewers  in  the 
extent  of  municipalization. 

In  electric  lighting  the  process  of  municipaliza- 
tion is  as  yet  mainly  in  the  small  places.  While 
but  three  cities  of  over  100,000  population,  accord- 
ing to  the  census  of  1890,  have  municipal  electric 
plants,  it  appears  from  the  list  of  302  municipal 
plants  reported  by  the  American  Electrical  Direc- 
tory for  1898,  in  cities  for  which  population  sta- 
tistics can  be  found,  that  122  are  owned  by  cities 
of  less  than  2,500  population,  89  by  cities  of  2,500 
to  5,000  population,  making  70  per  cent  of  the 
total  number  owned  by  cities  of  less  than  5,000 
population ;  51  are  owned  by  cities  of  5,000  to 
10,000,  20  by  cities  of  10,000  to  20,000,  16  by 
cities  of  20,000  to  50,000,  3  by  cities  of  50,000 
to  500,000,  and  one  by  a  city  of  1,500,000.     The 


60  MUNICIPAL  MONOPOLIES. 

fact  that  the  preponderance  lies  so  largely  on  the 
side  of  the  small  cities  and  villages  is  sometimes 
advanced  as  showing  that  large  cities  are  not  com- 
petent to  undertake  this  function.  While  such  a 
conclusion  is,  of  course,  not  logically  warranted, 
there  are  patent  reasons  why  municipal  ownership 
should  achieve  its  first  success  in  the  smaller 
municipalities.  Here  government  lies  close  to 
the  people.  The  officials  are  known  to  every  one. 
They  cannot  retire  under  the  shield  of  their  friends 
and  party  councilors.  They  are  accessible  to  the 
personal  complaints  of  every  one.  In  large  cities 
newspapers  do  the  complaining,  and  everybody 
discounts  these  as  the  organs  of  partisanship  or 
corporate  jobbery.  The  people  do  not  come  in 
contact  with  their  officials.  But  it  is  otherwise 
in  the  small  cities,  and  the  result  is  a  constant 
effort  on  the  part  of  officials  to  meet  the  demand 
for  efficiency  and  economy. 

The  voting  constituency,  too,  has  a  preponder- 
ance of  small  property-owners,  the  thrifty  and 
independent  middle  class2  who  have  always  been 
the  bulwark  of  popular  government.  There  are 
no  multi-millionaires  on  the  one  hand,  and  no  over- 
whelming array  of  wage-workers  dependent  upon 
them,  upon  the  other.  This  relieves  the  commu- 
nity both  from  the  machinations  of  a  few  rich 
men  who  in  every  city  use  their  power  to  exploit 
their  neighbors,  and  whose  interests  are,  therefore, 


MUNICIPAL   ELECTRIC  LIGHTING.  61 

against  honest  government;  and  also  from  the 
blind  struggles  of  the  working-classes  to  secure 
through  politics  those  advantages  and  liberties 
which  they  are  unable  to  obtain  in  industry.  This 
makes  both  the  administration  of  the  civil  service 
a  simple  matter,  and  the  hours  and  wages  of  labor 
in  public  employment  conform  to  the  most  exact- 
ing conditions  that  obtain  in  private  industry. 

On  page  62  and  63  is  a  table  showing  for  street 
plants,  in  large  and  small  cities,  the  varying  costs 
of  labor  per  arc  light  for  public  and  private  plants. 
By  comparing  sections  2  and  4,  it  will  be  seen  that 
small  places  with  long  hours  of  work  show  a  range 
of  labor  cost  from  $17.16  per  arc' to  $35.12,  while 
large  cities  with  short  hours  show  a  range  of  $23.46 
to  $52.21. 

It  will  be  seen  that  the  labor  cost  in  the  New 
York  City  private  plants  is  $3.88  per  arc  less  than 
in  Detroit,  and  $16.71  less  than  in  Chicago.  This 
difference  is  accounted  for  in  two  ways :  first,  by 
the  much  larger  output  per  station  in  New  York 
City;  second,  the  higher  wages,  shorter  hours,  and, 
consequently,  larger  staff  of  employees,  in  the  pub- 
lic plants.  In  the  larger  cities,  on  the  other  hand, 
the  larger,  output  and  larger  units  in  boilers,  en- 
gines, and  dynamos  would  tend  to  reduce  the  labor 
cost  per  unit  of  product.  The  case  of  Allegheny, 
with  its  extremely  low  labor  cost  notwithstanding 
short  hours,  is  noteworthy. 


62 


MUNICIPA L   MONOPOLIES. 


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64  MUNICIPAL  MONOPOLIES. 

It  should  be  said,  that,  as  an  offset  to  the  low 
wages  and  long  hours  in  smaller  places,  the  work 
is  much  easier  than  in  large  plants.  When  one 
fireman  and  one  engineer  run  a  small  plant  of 
100  arcs  in  conjunction  with  water-works,  prob- 
ably less  than  one-half  their  time  is  employed  in 
actual  work.  The  cost  of  living,  too,  is  much  less 
than  in  cities.  Consequently  the  urgency  for  both 
high  wages  and  short  hours  is  relatively  less. 

A  very  important  advantage  in  a  small  town  is 
the  ability  often  to  combine  the  electric-lighting 
plant  with  the  water-works.  Mr.  M.  J.  Francisco, 
of  Rutland,  Vt.,  in  his  pamphlet,  "  Municipal  Own- 
ership, Its  Fallacy," 1  insists  on  the  duplicity  of 
municipal  officials  who  charge  the  salaries  of  fire- 
men, engineers,  and  superintendents  of  electric 
works  to  the  water  department.  In  all  such  cases 
he  forthwith  corrects  the  dishonest  officials  by 
charging  all  the  wages  and  salaries  in  the  water- 
works to  the  electric-light  department.  The  rela- 
tive worth  of  the  two  methods  may  be  judged 
from  the  following  typical  cases. 

The  village  of  Batavia,  N.Y.,  owning  and  operating  its 
water-works  system,  decided,  in  1893,  to  add  an  electric- 
lighting  outfit  to  the  plant.  An  addition  was  made  to  the 
water-works  building  for  the  electric  machinery,  and  a  new 
boiler  was  erected.     Two  engineers,  at  $65.75  per  month 

1  Published  by  the  author,  Rutlaud,  Vt.,  1895. 


MUNICIPAL   ELECTRIC  LIGHTING.  65 

each,  had  been  all  the  force  needed  for  the  water-works. 
For  electric  lighting  there  were  added  one  electrician  at 
$65,  one  trimmer  at  $45,  and  one  fireman  at  $45,  and  the 
engineers'  salaries  were  increased  $5  each  per  month  ;  mak- 
ing the  total  additions  $165  per  month,  $1,980  per  year,  or 
$19.22  per  arc  lamp  per  year.  The  combination  with  the 
water-works  saves  the  salary  of  one  engineer,  $65  per  month, 
less  extra  pay  to  water-works  engineers. 

The  city  of  Dunkirk,  N.Y.,  installed  an  electric  plant 
with  its  water-works  in  1888.  The  water-works  staff  had 
been :  two  engineers,  $70  each,  two  firemen,  $50  each, 
superintendent  and  assistants,  $165  ;  total,  $405  per  month, 
or,  with  $350  per  year  for  clerk  and  collector,  $5,210  per 
year.  When  the  electric  plant  was  added,  with  an  addi- 
tional boiler,  a  trimmer  was  employed  at  $55,  and  the  fire- 
men were  given  $5  extra  pay ;  total,  $65  per  month,  which, 
with  $133.62  extra  labor  on  lines,  made  the  total  labor  cost 
$913.62  in  1897,  or  $12.18  per  arc.  As  a  matter  of  fact, 
the  Dunkirk  labor  cost  is  only  $133.62  a  year  more  for  both 
water  supply  and  electric  lights  than  it  had  been  for  water 
supply  alone;  because  one  superintendent  at  $100  a  month 
now  does  the  work  formerly  done  by  superintendent  and 
assistants  at  $165  per  month,  and  the  total  labor  cost  for 
both  departments  in  1897,  including  extra  labor,  was 
$5,343.62  against  $5,210  for  water  alone  before  1888.  But 
this  saving  of  $65  per  year  in  the  superintendent's  force 
has  been  properly  credited  to  the  water  department,  and 
the  extra  expense  for  electric  lighting  has  been  figured  at 
$913.62,  as  above. 

In  considering  the  cost  of  operation  in  these 
plants  connected  with  water-works,  the  conscien- 
tious defender  of  the  higher  charges  of  private 
plants  is  justified  in  pointing  out  that  they  cannot 


66  MUNICIPAL  MONOPOLIES. 

be  taken  as  a  fair  basis  of  comparison  with  private 
plants  operated  alone.  He,  however,  would  hardly 
go  as  far  as  Francisco,  and  claim  that  their  operat- 
ing accounts  were  dishonestly  compiled,  nor  would 
he  inflate  the  electric  account  by  means  of  the 
water  account.  The  officials  in  these  cities  have 
prepared  these  statements  with  a  definite  purpose, 
namely,  to  show  to  other  cities  having  water-works 
plants  the  very  slight  additional  expense  that  they 
would  incur  by  adding  an  electric  plant  to  their 
water  plant.  From  this  point  of  view  their  state- 
ments are  straightforward  and  correct.  They  dem- 
onstrate beyond  question  the  decided  advantage 
that  every  small  city  with  a  water  plant  has  in  es- 
pousing public  ownership  and  operation  of  electric 
works,  provided  the  two  can  be  incorporated  in 
one  establishment. 

There  are  many  small  villages  now  enjoying 
electric  lighting  which  would  probably  not  have 
secured  this  privilege  had  not  the  people  as  a 
whole,  in  their  corporate  capacity,  undertaken  it.1 

The  question  at  issue  is  not  one  between  public 
and  private  ownership,  but  whether  they  shall  have 

1  Mr.  Foster,  in  reviewing  the  list  of  thirty-four  towns  whose 
costs  he  has  tabulated,  and  showing  that  thirteen  have  less  than 
3,000  inhabitants,  five  have  between  3,000  and  5,000,  four  between 
5,000  and  10,000,  seven  between  10,000  and  20,000,  four  between 
20,000  and  30,000,  and  only  one  is  of  the  first  class,  or  over  1,000,000, 
remarks  that  "somewhat  over  half  the  number  are  places  where 
it  is  doubtful  if  a  commercial  or  private  plant  could  be  made  to 
pay  under  any  circumstances." 


MUNICIPAL   ELECTRIC  LIGHTING.  67 

electric  lighting  al  all.  If  they  have  made  a  suc- 
cess of  it,  and  have  produced  light  at  a  cost  no 
greater  than  other  cities  are  paying  private  compa- 
nies, this  is  certainly  to  the  credit  of  the  principle 
of  municipal  ownership  under  such  circumstances, 
if  under  no  other. 

PREVIOUS    INVESTIGATIONS. 

In  attempting  to  make  a  comparison  of  the 
actual  operations  of  municipal  and  private  owner- 
ship of  electric-lighting  plants  in  the  United  States, 
that  shall  be  at  the  same  time  fairly  exhaustive 
and  fairly  accurate,  one  is  confronted  with  the 
magnitude  and  expense  of  the  undertaking.  Noth- 
ing less  than  a  governmental  bureau  can  ade- 
quately undertake  so  large  an  inquiry.  It  must, 
therefore,  be  to  the  greatest  satisfaction  of  the  pub- 
lic to  know  that  the  United  States  Department  of 
Labor,  under  the  supervision  of  Carroll  D.  Wright, 
has  undertaken  exactly  such  an  investigation.  In 
view  of  this  prospective  mine  of  information,  I 
shall  not  undertake  to  consider  the  whole  field, 
but  shall  devote  my  attention  to  a  few  municipal 
plants  which  I  have  been  able  carefully  to  study 
personally,  and  to  a  critical  examination  of  some 
of  the  more  important  statistical  inquiries  that  have 
been  made  hitherto.  These  are  three  in  number : 
that  of  Mr.  H.  A.  Foster,  that  of  Mr.  M.  J.  Fran- 
cisco, and  that  of  Professor  Frank  Parsons. 


68  MUNICIPAL  MONOPOLIES. 

Mr.  Horatio  A.  Foster  was  employed  by  the  Electrical 
Engineer  to  report  on  an  inquiry  into  municipal  electric 
lighting,  undertaken  by  that  journal.  His  report  is  pub- 
lished in  the  issue  of  Sept.  5,  1894.  Mr.  Foster  is  an  elec- 
trical expert  and  accountant  of  high  standing,  who  was 
employed  on  the  census  of  1890 ;  and  his  report  is  undoubt- 
edly the  ablest  and  most  candid  of  all  the  investigations 
made  from  the  standpoint  of  those  who  defend  private  com- 
panies. Prof.  Frank  Parsons,  the  results  of  whose  extensive 
investigations  were  published  in  the  Arena  during  the  lat- 
ter half  of  1895,  gives  the  most  painstaking  and  exhaustive 
statistical  analysis  of  electric  lighting  yet  made  from  the 
standpoint  of  those  who  favor  municipal  operation.  Mr. 
Francisco's  pamphlet,  "Municipal  Ownership,  Its  Fallacy," 
was  published  in  1895 ;  so  that  the  three  writers  base  their 
calculations  on  conditions  as  they  existed  in  1893-1895. 

Foster  and  Francisco  are  antagonistic  to  municipal  own- 
ership, while  Parsons  favors  the  proposition. 

I  have  tabulated  (Table  II.,  pp.  70-71)  the  re- 
sults obtained  by  these  writers  as  to  the  cost  per 
lamp-hour  and  the  cost  per  year  of  arc  lighting,  in 
all  cases  where  two  or  more  estimates  for  the  same 
city  are  given.  These  reports  are  not  all  made 
upon  the  same  unit  as  a  basis,  and  I  have  been 
compelled  to  make  two  sets  of  computations  in  or- 
der to  bring  them  to  the  same  basis  for  comparison. 
Foster  and  Francisco  do  not  state  the  cost  per  year, 
but  they  state  the  cost  per  lamp-hour  and  the  num- 
ber of  hours  per  year;  and  I  have  computed  the 
cost  per  year.  Parsons  gives  only  the  cost  per  year, 
and  not  by  lamp-hour.     On  a  number  of  plants 


MUNICIPAL   ELECTRIC  LIGHTING.  69 

he  gives  only  the  operating  expense,  and  not  the 
interest  and  depreciation  ;  and  for  these  plants  I 
have  added  a  third  column,  where  I  have  taken  his 
operating  expense,  and  added  to  it  a  computation 
of  4  per  cent  interest  and  5  per  cent  depreciation 
on  the  total  investment  (not  debt,  as  he  prefers). 
A  final  column  is  added,  giving  for  certain  of  the 
municipalities  estimates  based  on  statistical  princi- 
ples developed  in  the  course  of  this  chapter,  but 
for  the  year  1897  instead  of  1894. 

These  three  writers  have  been  selected  because 
the  opponents  and  the  advocates  of  municipal  own- 
ership throughout  the  country  seem  to  rely  upon 
them  for  their  data  and  arguments  in  maintaining 
their  respective  opinions.  It  will  be  seen  that  they 
reach  the  most  contradictory  results.  Francisco 
far  exceeds  Foster  in  his  high  estimates  of  the  cost 
of  municipal  operation ;  and  Parsons,  while  his  es- 
timates are  materially  lower  than  either,  is  yet,  in 
such  cases  as  I  have  been  able  to  examine,  above 
the  estimates  made  by  the  municipal  officials  them- 
selves, and  generally  above  my  own  estimates. 

For  comparison  with  private  companies,  Table 
III.  has  been  compiled,  showing  the  highest  and 
lowest  and  average  prices  per  year  paid  by  cities 
to  private  companies  for  street-lighting.  The  fig- 
ures are  taken  from  Bulletin  4112,  issued  by  the 
General  Electric  Company,  Schenectady,  N.Y.,  and 
were  in  effect  during  1896-1897. 


70 


MUNICIPAL   MONOPOLIES. 


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74  MUNICIPAL   MONOPOLIES. 

Table  II.  presents  two  bases  of  comparison ; 
namely,  the  cost  per  lamp-year,  and  the  cost  per 
lamp-hour.  Francisco  and  other  writers  attach 
especial  value  to  a  third  basis,  that  of  the  candle- 
power  per  hour  furnished  for  one  cent.  This,  of 
course,  is  obtained  by  dividing  the  rated  candle- 
power  of  the  lamp  by  the  cost  per  lamp-hour. 
Francisco  has  compiled  a  table,  which  has  received 
wide  newspaper  circulation,  and  has  appeared  in 
the  reports  of  various  local  investigating  commit- 
tees, comparing  the  cost  per  hour  and  the  candle- 
power  per  hour  furnished  for  one  cent  in  municipal 
plants  with  those  where  contract  is  made  with  a 
private  company.  The  table  is  given  on  the  oppo- 
site page. 

Parsons  rejects  the  lamp-hour  basis  as  deceptive, 
and  with  it,  of  course,  the  candle-power-per-hour- 
for-one-cent  basis.  Indeed,  as  employed  by  Fran- 
cisco in  the  accompanying  table,  the  comparison  is 
utterly  unreliable.  Assuming  for  the  present  that 
he  has  correctly  calculated  the  cost  per  year,  there 
are  many  varying  elements  which  must  be  corrected 
before  we  can  compare  the  lamp-hour  or  candle- 
power  costs  as  he  has  done.  There,  are  first,  the 
relative  costs  of  coal  and  fuel  between  the  two 
places  compared.  A  2000  c.  p.  arc  light  requires 
4  to  10  tons  of  coal  per  year;  and  coal  varies  from 
an  average  of  |1.36  per  ton  in  Georgia  and  $1.56 
in  Pennsylvania,  to  $4.05  in  Massachusetts,  $5.00 


MUNICIPAL    ELECTRIC  LIGHTING. 


75 


TABLE  IV.       "A  Comparison  of  the  Cost  between  Municipal 

Plants  and  Private  Companies." 

FRA  NCI  SCO. 


Cost  of  Lights 

Where  Plant  is  owned  by 

the  Municipality. 


COST 

Per 

Hour. 


Cost  of  Lights 
Where  Contract 

is  made  with 
Private  Company. 


Cost 
Per 
Hour. 


^"3 
W3 


OS 


Alameda,  Cal.  .  . 
Aurora,  111.  .  .  . 
Bay  City,  Mich.  . 
Blooniington,  111.  . 
Chicago,  111.  .  . 
Crawfordsville,  Ind 
Danvers,  Mass. 
Dunkirk,  N.Y. .  . 
Easton,  Pa.  .  .  . 
Elgin,  111.  .  .  . 
Fairfield,  Iowa .  . 
Galion,  Ohio  .  . 
Grand  Ledge,  Mich 
Hannibal,  Mo.  .  . 
Herkimer,  N.Y.  . 
Madison,  Ind.  .  . 
Madison,  N.J.  .  . 
Marietta,  Ohio  .  . 
Bangor,  Me. .  .  . 
S.  Norwalk,  Conn. 
Council  Grove,  Kan. 
Ypsilanti,  Mich. 
Frederick,  Md.  . 
Galveston,  Tex. 
St.  Peters,  Minn. 
Little  Rock,  Ark 
Portland,  Ore.  . 
Statesville,  N.C. 
Staunton,  Va.    . 


.1458 

.0447 

.370 

.545 

.519 

.671 

.052 

.278 

.445 

.586 

.07 

.0511 

.1100 

.054a 

.0572 

.696 

.678 

.0589 

.0278 

.0571 

.0779 

.0664 

.0435 

.0557 

.0757 

.0541 

.0348 

.0355 

.0497 


137 

447 
531 
366 
385 
298 
433 
7  is 
449 
.'.41 
285 
391 
181 
370 
.",4!) 
287 
294 
339 
71!  1 
280 
i:,4 
•J!  IS 
195 
359 
264 
369 
.",74 
338 
241 


San  Diego,  Cal.    .     . 

Joliet,  111 

Jackson,  Mich.  .  . 
Galesburg,  111.  .  . 
Chicago,  111.     .     .     . 

Peru,  Ind 

Lynn,  Mass.  .  .  . 
Auburn,  N.Y.  .  .  . 
Harrisburg,  Pa.  .  . 
Danville,  111.  .  .  . 
Burlington,  Iowa 
Circleville,  Ohio  .  . 
Grand  Rapids,  Mich. 
St.  Louis,  Mo. .  .  . 
Batavia,  N.Y. .  .  . 
Evansville,  Ind.  .  . 
Camden,  N.J.  .  . 
jColumbus,  Ohio  .  . 
Skowhegan,  Me.  .  . 
Bridgeport,  Conn.  . 
j Atchison,  Kan.  .  . 
'Lowell,  Mich.  .  .  . 
Baltimore,  Md.  .  . 
Dallas,  Tex.  .  .  . 
Minneapolis,  Minn. . 
Arkansas  City,  Ark. 
Salem,  Ore.  .  .  . 
Charlotte,  N.C.  .  . 
Parkersburg,  Va. 


.0874 

.0266 

.232 

.532 

.0437 

.0266 

.0365 

.253 

.240 

.0365 

.454 

.0400 

.0360 

.0200 

.0240 

.545 

.0371 

.0365 

.0187 

.0368 

.0384 

.0533 

.0319 

.0253 

.0648 

.0224 

.0320 

.0325 

.0256 


229 
751 
862 
375 
451 
884 
547 
787 
750 
547 
440 
500 
555 
1000 
833 
366 
539 
547 
802 
326 
312 
375 
626 
787 
309 
937 
625 
375 
781 


"  In  the  above  table,  places  from  the  same  State  are  compared,  and 
working  as  near  as  possible  under  the  same  conditions.  Where  water- 
power  is  used  by  a  city,  the  private  plant  selected  is  also  water-power." 


70  MUNICIPAL  MONOPOLIES. 

in  Maine,  and  $7.00  in  California.1  Francisco  has 
attempted  to  eliminate  this  variant  by  comparing 
p Unite  in  the  same  State,  which  is  a  fairly  adequate 
correction.  But  he  has  not  eliminated  two  other 
variants  which  are  equally  disturbing;  namely,  the 
differences  in  the  relative  costs  of  producing  a 
1,200  c.  p.  light  and  a  2,000  c.  p.,  and  in  the  rela- 
tive costs  of  running  the  lights  on  short  schedules 
compared  with  the  all-night  schedule.  Only  in 
case  the  cost  of  production  varies  in  exactly  the 
same  ratio  as  both  the  rated  candle-power  of  the 
lamps  and  the  number  of  hours  burned  per  year, 
will  it  follow  that  lamp-hour  and  candle-power 
hour  costs  for  different  lights  and  different  sched- 
ules can  be  directly  compared  with  each  other. 
Now,  as  a  matter  of  fact,  private  companies  do 
not  charge,  for  light  in  proportion  to  the  rated 
candle-power  or  the  schedule  of  hours. 

CHARGES  MADE  BY  PRIVATE  COMPANIES  FOP 
DIFFERENT  CANDLE-POWER  ARCS  AND  DIF- 
FERENT   SCHEDULES    OF    HOURS. 

Comparing  first  the  sub-arc  (1,200  c.  p.)  with  the  full  arc 
(2000  c.  p.),  Parsons  estimates  the  cost  of  producing  a  sub- 
arc  at  ^,  or  14  per  cent,  less  than  a  full  arc,  agreeing  with 
Buckley's  2  figures  of  lamp-hour  costs,  which  show  (by  com- 
putation) that  the  sub-arc  costs  83  to  90  per  cent  of  the  cost 
of  the  full  arc. 

1  Bulletin  4112,  General  Electric  Company,  Schenectady  N.Y. 

2  Buckley,  W.  J.,  "Electric  Lighting  Plants,"  Chicago,  1894. 


MUNICIPAL   ELECTRIC  LIGHTING. 


77 


A  compilation  made  by  a  committee  of  the  American 
Society  of  Municipal  Improvements  in  1896  showed  that  in 
14  States  the  average  price  by  contract  for  sub-arcs  ($74.67) 
was  80  per  cent  of  the  price  in  31  States  for  full  arcs 
($94.21).  Taking  the  13  States  for  which  averages  are 
given  on  both  lamps,  I  have  compiled  Table  V.,  which 
shows  a  range  in  price  from  50  per  cent  in  Missouri  to  120 
per  cent  in  New  York,  and  an  average  of  76  per  cent  for 
the  sub-arc  compared  with  the  full  arc. 

TABLE   V. 
Average  Prices  for  Full  Arcs  and  Sub- Area  in  Thirteen  States. 


2,000  C.  P. 

1,200  C.  P. 

Per  Cent. 

Connecticut  .... 

$80.60 

$86.20 

100 

90.00 

60.00 

66 

69.07 

36.00 

51 

69.10 

64.25 

92 

Massachusetts 

148.80 

90.60 

61 

81.80 

67.50 

83 

75.10 

37.78 

50 

Nebraska .     . 

109.33 

44.28 

42 

New  Hampshir 

8 

99.00 

75.00 

76 

New  York     . 

83.10 

100.00 

120 

100.00 

74.16 

74 

78.00 

65.00 

86 

Wisconsin     . 

93.00 

76.25 

82 

76 

Superintendent  Hunter  of  the  department  of  Public 
Lighting  of  Allegheny  estimates  about  the  same  difference 
between  the  two.  He  considers  that  where  a  private  com- 
pany furnishes  light,  and  where  coal  is  $1.00  per  ton,  as  at 
Allegheny,  a  fair  price  for  4,000  hours'  service  is  $80.00 
per  year  for  2,000  c.  p.,  and  $60.00  for  1,200  c.  p.  arc 
lamps,  a  difference  of  25  per  cent. 

If  we  accept  the  average  of  the  committee's  report,  or 


78  MUNICIPAL   MONOPOLIES. 

the  estimate  of  Hunter,  as  approximate,  we  shall  have  the 
following  corrections  to  make  in  order  to  reduce  the  two 
grades  of  lamps  to  a  common  basis  for  comparison  :  A 
sub-arc  furnishes  |  less  c.  p.  than  a  full  arc,  consumes  £  less 
energy  (325  watts  against  480  watts),  and  costs  £  less  per 
year  or  hour.  Therefore,  to  compare  the  amount  of  candle- 
power  per  hour  furnished  for  1  cent,  deduct  ^  from  that 
furnished  by  a  full  arc,  or  add  J  to  that  furnished  by  a  sub- 
arc,  as  explained  by  the  following  table  :  — 

TABLE  VI. 


Rated  candle-power 

2,000  c.  p. 

1,200  c.  p. 

Cost  per  year,  4,000  hours     .     .     . 

$80.00 

$60.00 

Cost  per  hour,  iu  cents     .... 

.020 

.015 

C.  P.  per  hour  for  1  cent  .... 

1000. 

800. 

To  reduce  to  common  basis  of  cost, 

Deduct  5 

Add  4. 

TABLE  VII.       Conventional  Schedules  of  Hours'   Service. 


General 
Electkic 
Company. 

Francisco. 

Foster. 

All  every  night  . 
All-dark  nights  . 

4,000 
3,680 
3,460 
2,645 
2,190 
2,179 

3,750 

2,190  to  2,622 
1,875 

1.460 

3,950 

2,160  to  2,190 
1,838  to  2,000 

Dark  nights  to  1  o'i 

lock  . 

1,980 
1,825 
1,815 
1,720 
1,550 
1,460 
1,220 

Moonlight  to  12.30 
12.30,  26  nights    . 
Moonlight  to  1     . 
Every  night  till  11 
Moonlight-Midnigl 

t   .     . 

In  attempting  to  reduce  the  different  schedules  of  hours 
to  a  common  basis  of  cost,  we  are  met  by  two  obstacles. 


MUNICIPAL   ELECTRIC  LIGHTING. 


79 


Private  owners  seldom  report  the  actual  number  of  hours 
per  year,  but  give  in  its  place  conventional  terms,  such  as 
"  all-night,"  "  moonlight,"  etc. ;  and  various  writers  attach 
widely  different  values  to  these  terms.  Table  VII.  (p.  78.) 
shows  these  variations,  as  stated  or  inferred  from  the  com- 
pilations of  the  General  Electric  Company,  Francisco,  and 
Foster. 

For  our  present  purposes  I  shall  group  these  schedules 
under  four  divisions  on  the  basis  of  4,000  hours  for  all- 
night  service. 


TABLE   VIII.       Standard  Schedules  of  Hours'  Service. 


Standard 
Schedules. 

CO    1 

Schedules  included  in 
Standard. 

Hours  per 
Year. 

Hours  per  Year. 

Hours  per 
Night. 

All-night 

Moonlight 

Midnight-Moonlight  . 

4,000 
2,400 
2,000 
1,000 

I 

3 
5 

3,000  to  4,000 
2,150  to  3,000 
1,800  to  2,150 
1,200  to  1,800 

9    to  11 

6    to     7 
5    to     6 
3£  to    5 

Beginning  with  the  moonlight  schedules,  I  have  com- 
puted, in  Table  IX.,  for  the  seven  cities  in  the  United  States 
which,  according  to  the  bulletin  of  the  General  Electric 
Company,  have  both  all-night  and  moonlight  schedules,  the 
differences  between  the  prices  paid  for  the  two  schedules  in 
percentages  of  the  all-night  schedules.  Table  IX.  shows 
that  for  the  moonlight  schedules,  furnishing  about  §  less 
candle-power  per  year,  the  average  contract  price  is  but  £ 
less  per  year  than  for  the  all-night  schedules.  Parsons  esti- 
mates the  cost  of  the  moonlight  schedule  at  £  less  (p.  484), 
but  his  moonlight  schedule  is  8  hours  instead  of  6  to  7 ; 
while  a  computation  of  Buckley's  figures  for  a  6-hour  com- 
pared with  a  10-hour  schedule  gives  J  less.1     The  lamp-hour 

1  See  Buckley,  "  Electric  Lighting  Plants,"  Chicago,  1894. 


80 


MUNICIPAL  MONOPOLIES. 


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MUNICIPAL   ELECTRIC  LIGHTING. 


81 


price  for  these  7  cities  is  40  per  cent  higher.  Buckley's  esti- 
mate is  37  per  cent.  The  c.  p.  for  one  cent  is  30  per  cent  less. 
We  may  safely  place  the  lamp-hour  cost  of  the  moonlight 
schedule  in  general  at  |  higher  (33J  per  cent)  than  that  of  the 
all-night  schedule,  and  this  would  give  the  c.  p.  for  one  cent 
at  |  less.  The  following  scheme  will  show  the  computa- 
tions necessary  to  secure  a  common  basis  of  cost :  — 

TABLE  X. 


To  Compare  All-night 

with 
Moonlight  Schedule. 

To  Compaee  Moonlight 

with 
all-night  Schedule. 

Cost  or  price  per  year,              Deduct  | 
Lamp-hour  price  .     .                Add  J 
C.  P.  for  one  cent  .     .              Deduct  1 

Addl 

Deduct  1 

Add  J 

The  following  calculation  for  a  typical  case  will  illus- 
trate the  scheme  :  — 

TABLE  XI.       Comparison  of  Schedules  for  2,000  C.  P.  Lamp. 


Pbke 

Price 

C.  P. 

PEE  YEAB. 

per  Hour. 

for  1  Cent. 

All-night,  4,000  hours .... 

$100.00 

$.025 

800 

Moonlight,  2,400  hours     .     .     . 

80.00 

.033+ 

600 

To  reduce    moonlight   to   all- 

Add  1 

Deduct  1 

Addi 

Three  cities  having  both  midnight  and  all-night  sched- 
ules (Table  XII.)  show  that  the  contract  price  for  the  former 
is  \  less  than  for  the  latter.  Parsons  makes  it  J  less,  but 
his  midnight  schedule  is  6  to  7  hours  instead  of  5  to  6. 
Computations  based  on  Buckley's  5-  and  10-hour  schedules 
give  i  less  for  the  former.  These  three  cities  show  the  lamp- 
hour  price  to  be  78  per  cent  higher.  Buckley's  figures  are 
50  per  cent  higher  for  2,000  c.  p.,  and  43  per  cent  more  for 
1,200  c.  p.     The  data  here  are  conflicting,  but  we  may  accept 


si 


M  U \ ICIPA L   M 0X0 POL IES. 


Buckley's  estimates.  We  shall  then  have  the  following 
scheme  for  correcting  comparisons  of  midnight  and  all- 
night  schedules  (Table  XIII.) :  — 

TABLE  XII.       Comparison  of  All-Night  and  Midnight  Prices 
by  Contract,  4,000  and  2,000  Hours. 


Peice  Pee 
Yeas. 

z  . 

Oh 

Peice  Pee 
Houe. 

f  ■ 
■a  a 

cs2 

C.  P.  FOE 
1  C. 

r.  ■ 

°s 

K 

Ph 

70 
45 
43 

All- 
night. 

Mid- 
night. 

►J  o 

i    H 

-  a 
S  o 

s  2 

i    H 

-    = 

<  5 

is 

522 
646 
380 

South  Bend, 
Ind.,    2,000, 

Battle  Creek, 
Mich.,  2,000, 

Lincoln,  Neb., 

2,000, 

Average  .     . 

$90.00 

09.00 

120.00 

$70.00 
57.00 
96.00 

22 
18 
20 

$.023 
.017 
.030 

$.038 
.031 
.056 

66 
83 

87 

890 

1180 

666 

$93.00 

$74.33 

20 

78 

53 

TABLE    XIII. 


to  compaee 
All-night  with  Mid- 
night Schedule. 

To  Compaee  Mid- 
night with  All-night 
Schedule. 

Cost  or  price  per  year  . 
Price  per  hour      .     .     . 
C.  P.  for  1  cent     .     .     . 

Deduct  | 

Add  h 
Deduct  | 

AddJ 

Deduct  | 

AMh. 

The  following  calculation  illustrates  the  scheme :  — 
TABLE    XIV. 


Peice  i-eb 
Yeae. 

Peice  pee 
IIoue. 

C.P.  FOB 
1  CENT. 

All  night,  4,000  hours  .     . 
Midnight,  2,000  hours  .     . 
To  reduce  midnight  to  all- 

night 

$100.00 
75.00 

Add  i 

$.0250 
.0375 

Deduct  i 

800 

533 
Add£ 

MUNICIPAL   ELECTRIC  LIGHTING. 


83 


For  a  comparison  of  the  moonlight-midnight  schedules 
the  General  Electric  bulletin  gives  two  cities  (Dover,  N.H., 
and  Atchison,  Kan.),  in  which  the  prices  per  year  are  respec- 
tively 23  per  cent  and  50  per  cent  less  than  the  all-night 
schedules  ;  the  lamp-hour  prices  are  107  per  cent  and  64  per 
cent  higher,  and  the  candle-power  for  one  cent  is  61  per 
cent  and  39  per  cent  less.  Buckley  estimates  a  4-hour 
schedule  at  75  per  cent  more  and  a  3-hour  schedule  at  100 
per  cent  more,  per  lamp-hour,  than  a  10-hour  schedule,  while 
the  price  per  year  is  £  to  f  less.  Assuming  that  £  less  is 
approximately  correct,  we  have  the  following  rule  :  — 

TABLE    XV. 


To  Compare  all- 
night  with  Moon- 

LlGIIT-MlDNIQUT 

Schedule. 

To  Compare  Moon- 
light-Midnight 
Schedule  with  all- 
night. 

Price  per  year .... 
Price  per  hour      .     .     . 
C.  P.  for  1  cent     .     .     . 

Deduct  £. 

Add  %. 
Deduct  §. 

-    Add£. 

Deduct  §. 
Add  f. 

The  following  illustrates  the  rule  :  — 
TABLE    XVI. 


All-night,  4,000  hours  .  .  . 
Moonlight-midnight,         1,600 

hours  

To  reduce  moonlight-midnight 

to  all-night  basis      .... 


$100.00 

66.66 

Add  £. 


$.0250 

.0416 

Deduct  t. 


800 

320 

Add  I. 


The  foregoing  rules  for  correcting  the  comparisons  of 
costs  of  electric  lighting  are  offered  as  combining  simplicity 
and  a  fair  approximation  to  the  actual  conditions  of  the 
business.  The  reasons  underlying  them  will  appear  when 
pnce  the  peculiar  character  of  the  business  is  understood. 

Every  enterprise  has  two  main  divisions  of  expense  ; 


84  MUNICIPAL   MONOPOLIES. 

first,  fixed  charges,  such  as  interest,  rents,  royalties,  sinking- 
fund,  taxes,  insurance ;  and,  second,  operating  expenses. 
But  operating  expenses  are  also  subdivided  into  fixed  ex- 
penses and  variable  expenses.  Fixed  expenses  are  salaries, 
legal  expenses,  and  such  part  of  wages,  fuel,  etc.,  as  are 
required  to  keep  the  plant  going  with  the  minimum  hourly 
output.  Variable  expenses  are  proportionate  to  the  output. 
Now,  in  electric  lighting,  the  variable  expenses  form  but  a 
small  part  of  the  total  cost  compared  with  fixed  charges 
and  expenses.  Electricity  cannot  be  profitably  stored  for 
future  delivery  like  gas  or  other  products,  but  must  be 
generated  at  the  very  time  when  the  consumer  uses  it. 
Consequently  the  plant  must  always  be  equipped  to  supply 
the  maximum  demand,  although  this  demand  occurs  for  but 
one  hour  of  but  one  day  in  the  year.  That  is  to  say,  the 
fixed  charges  and  expenses,  which  are  the  largest  part  of 
the  total  expense,  are  determined  by  the  maximum  demand, 
and  they  continue  right  through  the  time  of  the  minimum 
demand. 

The  accompanying  load  line  chart,  constructed  from 
half-hour  readings  for  one  day  in  a  typical  station,  shows 
the  wide  variation  in  the  demands  on  the  station  at  differ- 
ent hours.  In  this  station  the  total  output  was  16,149 
kilowattrhours,1  an  average  of  672  kilowatts  per  hour  for 

1  The  practical  unit  of  electrical  energy,  or  the  rate  of  work- 
ing in  a  circuit,  is  the  watt.  One  horse-power  is  746  watts;  the 
kiloivatt  is  1,000  watts.  Watt-hour  is  the  electrical  energy  capa- 
ble of  working  at  the  rate  of  one  watt  for  one  hour.  The  volt  is 
the  unit  of  electromotive  force  or  pressure ;  the  ampere  is  the 
unit  of  current  or  quantity.  The  volt-ampere  is  therefore  the 
watt.  Thus  the  standard  adopted  as  a  2,000  candle-power  arc 
lamp  is  one  hurning  with  a  current  which  measures  9.6  amperes 
and  45  to  50  volts  to  each  lamp,  equivalent  to  432  to  480  watts. 
The  British  "  Board  of  Trade  Unit"  is  the  kilowatt,  usually  ab- 
breviated "B.  of  T.  unit,"  or  simply  "unit."  This  is  the  legal- 
ized unit  adopted  by  the  Board  of  Trade, 


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MUNICIPAL   ELECTRIC  LIGHTING.  85 

the  day.  But  the  demand  ranged  from  180  to  1,575  kilo- 
watts ;  and  the  total  capacity  of  the  plant  was  utilized  for 
only  one  half-hour  of  the  day,  while  practically  the  same 
amount  of  labor  was  required  to  operate  the  plant  when  the 
load  was  500  as  when  it  was  1,500  kilowatts. 

From  this  chart  we  can  see  how  it  is  that,  according  to 
Garcke's  "  Manual  of  Electrical  Undertakings,"  "  the  cost 
of  supplying  an  individual  consumer  with,  say,  100  units 
[100  kilowatts]  of  electricity  per  day  is  almost  entirely 
governed  by  the  rate  at  which  he  takes  it.  If  he  is  a  very 
regular  customer,  and  requires  electricity  delivered  at  an 
even  rate  for  eight  hours,  it  is  necessary  to  keep  only  about 
22  horse-power  of  plant  at  the  works  for  his  account.  If, 
however,  he  wants  the  100  units  delivered  to  him  in  one 
hour,  it  is  necessary  to  keep  about  170  horse-power  of  plant 
at  the  works  in  readiness  for  him  at  any  time.  Of  course, 
consumers  vary  largely  between  these  two  examples ;  but 
the  cost  of  supplying  any  one  of  them  with  a  given  amount 
of  electricity  is  chiefly  governed  by  the  amount  of  his  max- 
imum demand  at  any  one  time. 

"  The  correct  way  to  charge  for  electricity  is  to  give 
liberal  rebates  to  those  customers  wTho  make  prolonged  use 
of  the  plant  regularly  throughout  the  year ;  that  is  to  say, 
the  lower  the  maximum  demand  and  the  greater  the  con- 
sumption, the  better  should  be  the  discount.  [In  the 
Brighton  system  of  charging  there  are  two  meters,  —  the 
ordinary  one,  which  measures  the  quantity  of  electricity 
taken,  and  the  Wright  "  demand  meter,"  which  indicates 
the  equivalent  of  the  maximum  number  of  lamps  which  the 
consumer  has  ever  had  on  simultaneously  during  the  period 
for  which  he  is  to  be  charged.  In  effect,  it  shows  the 
amount  of  plant  which  the  station  has  had  to  keep  on  hand 
for  his  use.]  The  principle  is  usually  applied  in  this  way: 
If  the  indicator  shows  that,  say,  20  lamps  is  the  greatest 


86 


MUNICIPAL  MONOPOLIES. 


number  which  the  consumer  has  turned  on  simultaneously, 
then  he  gets  a  large  discount  on  all  the  current  which 
his  ordinary  meter  shows  that  he  has  taken  beyond  the 
equivalent  of  one  hour's  daily  use  of  those  20  lamps." 

The  following  table,  computed  on  the  Brighton  rates, 
will  illustrate  the  method.  The  rate  at  Brighton  is  Id. 
(14c.)  for  one  kilowatt  one  hour  daily  and  \\d.  (3c.)  per 
kilowatt-horn-  in  excess. 


TABLE  XVII.  Charges  per  KW  for  One  to  Ten  Hours 
Daily  Use  by  Brighton  Municipal  Plant,  at  Id.  and.  \\d. 
(14  and  3c). 


HOUES. 

Computation. 

Actual 
Charge. 

Proportionate 
Charge. 

1  hour, 

$.14 

=  $.14 

$    .14 

2  hours, 

.14  +  3 

=    .17 

.28 

3      " 

.14  +  3  +  3 

=    .20 

.42 

4      " 

.14  +  3  +  3  +  3 

=    .23 

.56 

5      " 

.14  +  3  +  3  +  3  +  3 

=    .26 

.70 

6      " 

.14+  (ox  3) 

=    .29 

.84 

7      " 

.14 +(6  x3) 

=    .32 

.98 

8      " 

.14 +(7  x  3) 

=    .35 

1.12 

9      " 

'.14  +  (8x  3) 

=    .38 

1.26 

10      " 

.14  +  (9x  3) 

=    .41 

1.40 

Meter  rates  are  universal  in  Great  Britain,  whereas  con- 
tract rates  prevail  ^n  America.  Table  XVIII.  furnishes  a 
comparison  of  meter  and  contract  prices  in  various  localities 
for  our  four  standard  schedules,  together  wTith  a  computa- 
tion showing  the  percentage  of  each  price  which  is  added 
for  the  all-night  schedule.  The  ordinary  meter  gives,  of 
course,  a  proportionate  price  for  all  quantities  of  current,  — 
10  times  the  quantity  of  light  costs  10  times  the  price; 
but  Wright's  "demand  meter"  or  "indicator,"  with  two 
rates,  gives  a  digressive  price.     At  Blackburn's  rates  of  12 


MUNICIPAL   ELECTRIC  LIGHTING. 


87 


cents  and  6  cents,  one  kw.  10  hours  costs  5|  times  as  much 
as  for  one  hour,  and  only  83  per  cent  more  than  5  hours. 
At  Brighton's  rates  of  14  cents  and  3  cents,  10  hours  costs 
the  consumer  2^  times  one  hour,  and  only  60  per  cent  more 
than  5  hours.  The  contract  rates  in  the  United  States  make 
heavier  discounts  on  long  schedules  than  the  heaviest  yet 
adopted  by  meter  in  Great  Britain,  the  usual  incandescent 
all-night  rate  being  only  50  per  cent  higher  than  the  mid- 
night rate ;  while,  as  we  have  already  seen,  the  all-night  arc 
rate  for  street-lamps  is  only  i  higher  than  the  midnight 
rate.  The  latter  corresponds  closely  with  Buckley's  esti- 
mate of  the  actual  increase  in  cost.     (See  Table  XVIII.) 


TABLE    XVIII.       Comparative  Rates  and  Percentages  for 
Standard  Schedules. 


h 

Meter  Rates 

CONTRACT 

Peb  Cent  of  Rate  Added  for 

0 
25 

a 

Per  KW  Hour. 

Rates. 

All-Night  Schedule. 

.• 

Meter. 

Contract. 

a 

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18.00 

100.00 

73.00 

The  Brighton  system  of  charging,  by  which  the  advan- 
tages of  both  contract  rates  and  meter  rates  are  combined, 
is  an  interesting  refutation  of  the  plea  that  municipal  enter- 
prise is  not  progressive  and  inventive.  The  system  and  the 
meter  employed  were  both  the  invention  of  the  city  elec- 


88  MUNICIPAL  MONOPOLIES. 

trician,  and  have  been  copied  by  many  private  companies. 
After  three  years'  experience  the  customers  are  thoroughly 
satisfied,  and  the  city  sells  50  per  cent  more  current  in  pro- 
portion to  the  plant  used  than  it  could  on  the  ordinary  sys- 
tem of  charging.  "  That  means  that,  without  reducing 
expenses,  they  can  reduce  the  average  price  to  about  75  per 
cent  of  the  former  price,  keep  up  the  same  rate  of  divi- 
dends, and  have  everything  over  the  75  per  cent  as  clear 
profit."1  It  will  be  noticed,  however,  that  the  meter  rates 
which  have  been  adopted  by  Brighton  have  not  yet  reached 
the  heavy  discounts  on  long  schedules  which  prevail  under 
contract  rates  in  America,  and  which,  according  to  Buckley, 
more  nearly  correspond  to  the  actual  relative  costs  of  pro- 
duction. 

The  foregoing  lengthy  diversion  has  seemed 
necessary  in  order  to  prepare  the  student  of  elec- 
trical-lighting problems  for  a  proper  judgment 
upon  the  comparisons  which  Francisco  and  others 
have  made  between  the  costs  of  municipal  and 
private  enterprises. 

Returning  now  to  Francisco's  table  of  candle- 
power  per  hour  for  one  cent  (Table  IV.),  we  can 
apply  the  corrections  which  have  been  formulated 
above,  and  so  secure  a  common  basis  of  compari- 
son. In  Table  XIX.  I  have  regrouped  the  muni- 
cipal plants  cited  by  him,  according  to  our  standard 
schedules,  taking  the  all-night  schedule  as  the  basis, 
and  assuming  that  all  plants  with  schedules  of  3,000 
hours  and  over  are  sufficiently  near  the  all-night 

i  The  Electrical  Engineer,  Oct.  21,  1896,  p.  393. 


MUNICIPAL   ELECTRIC  LIGHTING.  89 

schedule  to  obviate  the  need  of  correction.  The 
other  groups  have  been  corrected  to  the  all-night 
2,000  c.  p.  basis,  first  on  the  basis  of  Francisco's 
estimate  of  cost  (column  4),  and  second  on  Par- 
sons's  costs  as  given  in  Table  II.,  using  Francisco's 
schedules  of  hours  (columns  6,  7).  Similar  cor- 
rections have  been  made  for  all  the  private  plants, 
as  will  appear  in  the  table. 

A  study  of  this  table  shows  that  corrections 
have  been  made  for  18  of  the  28  couplets  in  Fran- 
cisco's original  table,  and  that,  whereas  he  showed 
an  excess  of  candle-power  for  one  cent  in  the  pri- 
vate plant  over  the  public  plant  in  every  one  of 
the  18  couplets,  the  corrected  table  shows  that 
there  are  but  4  of  the  18  cases  in  which  private 
plants  exceed  the  public.  (Compare  columns  7 
and  10,  black-face  figures.) 

We  have  now  considered  the  varying  factors 
that  should  be  taken  into  account  in  comparing 
municipal  and  private  costs  and  prices,  but  have 
not  yet  inquired  into  the  actual  statistics  on  which 
these  comparisons  are  based. 

Table  XIX.  is  based  on  the  figures  of  costs  fur- 
nished by  Francisco  and  Parsons  respectively,  but 
does  not  explain  the  reasons  for  their  wide  dis- 
crepancies.    This  is  our  next  inquiry. 


90 


M CNICIPAL   MONOPOLIES. 


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92  MUNICIPAL   MONOPOLIES. 

WHY   INVESTIGATORS   DIFFER. 

With  reference  to  the  method  of  investigation 
followed  by  the  writers  here  examined,  it  must 
be  borne  in  mind  that  correspondence  and  official 
reports  have  been  mainly  relied  upon.  Foster,  by 
his  own  showing,  had  not  personally  visited  any 
of  the  plants  concerning  which  he  reports ;  Fran- 
cisco appears  to  have  visited  but  one  of  the  sixty- 
four  plants  tabulated  in  his  pamphlet ;  and  Parsons 
has  apparently  visited  not  more  than  five  or  six. 

Now,  I  do  not  maintain  that  the  correspondence 
method  will  fail  to  give  accurate  results.  It  de- 
pends upon  the  care  and  pertinacity  of  the  investi- 
gator. In  this  respect  Parsons  excels  the  other 
gentlemen.  Foster  makes  many  guesses  upon  the 
rate  of  interest,  cost  of  labor  and  fuel,  number  of 
hours  burning,  and  candle-power.  These  two  wri- 
ters give  the  official  figures  wherever  they  have 
obtained  them,  and  then  their  own  estimates  sub- 
sequently as  computed,  and  as  printed  in  Table  II. 
Francisco  gives  only  occasionally  the  data  for  his 
computations,  and  we  are  left  to  infer  them  from 
hints  here  and  there.  The  principal  difficulty  in 
the  way  of  securing  sound  results  by  correspond- 
ence is  the  impossibility  of  finding  out  and  weigh- 
ing the  hundred  and  one  local  peculiarities  which 
give  tone  and  detail  to  the  enterprise. 

These  often  give  a  decided  turn  to  the  inquiry. 


MUNICIPAL  ELECTRIC  LIGHTING.  93 

Many  of  them  cannot  be  presented  statistically. 
For  example,  the  village  of  Batavia,  New  York, 
by  providing  a  council  chamber  in  the  building 
which  houses  its  electrical  plant,  saves  $120  in 
rent  each  year,  equal  to  $1.20  per  arc  light.  Fur- 
ther, no  one  can  appreciate  the  sense  of  relief  from 
the  exactions  of  private  corporations,  and  the  civic 
pride  and  dignity  of  the  citizens  who  have  success- 
fully overcome  these  exactions,  unless  he  visits 
them,  talks  with  them,  and  learns  the  history  of 
their  movement  for  municipal  ownership. 

OPERATING   EXPENSES. 

In  attempting  to  explain  the  wide  discrepancies 
in  these  three  methods  of  estimating  the  cost  of 
municipal  lighting,  we  need  to  divide  the  cost  of 
production  into  two  parts,  operating  expenses  and 
fixed  charges.  Operating  expenses  are  usually 
stated  by  the  officials  of  the  various  cities  in  their 
annual  reports ;  and  these,  with  the  annual  output 
given,  make  it  difficult  to  arrive  at  wide  discrep- 
ancies in  estimating  the  operating  costs  per  lamp. 
While  Foster  and  Parsons  reach  apparently  oppo- 
site conclusions  regarding  the  cost  of  municipal 
compared  with  private  enterprise,  yet  their  differ- 
ences are  found  not  so  much  in  the  labor  cost  per 
arc  light  (see  Table  I.),  nor  in  the  total  operating 
expenses  (see  Table  XX.),  as  in  their  estimates 


94 


MUNICIPAL   MONOPOLIES. 


on  interest  and  depreciation.  The  actual  operating 
expenses,  including  wages,  fuel,  stores,  and  sup- 
plies, are  matters  of  record  stated  by  the  local  offi- 
cials themselves  in  their  annual  reports,  together 
with  the  total  number  of  lights  operated  during 
the  year.  Therefore  but  little  variation  could  occur 
in  computing  the  labor  cost,  as  will  be  seen  by  not- 
ing the  cases  where  the  two  happen  to  give  figures 
on  the  same  plant.  I  give  herewith  all  the  cities 
on  which  both  give  reports. 

TABLE    XX. 
Comparative  Estimates  of  Operating  Expenses  per  Arc  Lamp. 


Chicago,  111 

Easton,  Pa 

"W.  Troy  (Watervliet),  N.Y, 

Dunkirk,  N.Y 

Goshen,  Ind 

Painesville,  O 

Little  Rock,  Ark.     .     .     . 

Aurora,  111 

Fairfield,  Iowa     .... 


FOSTEK. 


$96.50 
82.44 
61.22 
47.28 
67.85 
49.42 
68.50 1 
57.59 
70.39 


Pabsons. 


$96.50 
85.33 
61.00 
46.00 
68.00 
52.50 
42.001 
53.50 
70.00 


Francisco  is  an  exception  to  this  agreement. 
He  vigorously  attacks  the  published  reports,  and 
discovers  malicious  attempts  to  transfer  accounts, 
to  misrepresent  operating  expenses  and  repairs  as 
new  construction,  to  charge  electric  light  to  other 
departments,  and  generally  to  bolster  up  a  rotten 
business  for  the  benefit  of  nobody  but  the  politi- 


1  Foster  gives  132  arcs,  Parsons  210. 


MUNICIPAL   ELECTRIC  LIGHTING.  95 

cians.  I  am  unable  to  follow  him  in  all  his  figures  ; 
but,  judging  from  his  analysis  of  the  financial  ac- 
counts of  S wanton,  Vt.,  one  can  fairly  conclude 
that  his  treatment  of  other  municipal  plants  is 
utterly  untrustworthy.1 

1  Francisco  says,  in  the  Electrical  World  for  June  8,  1897,  that 
the  village  of  Swanton,  Vt.,  "  voted  a  tax  of  30  per  cent,  one-half 
of  it  to  he  used  in  paying  the  expenses  of  the  electric-light  plant, 
and  the  other  half  for  all  the  other  expenses  of  the  village,  includ- 
ing streets,  sidewalks,  sewers,  water,  fire-department,  and  police. 
This  shows  that  the  electric  lights  require  one-half  of  the  entire 
money  received  from  the  tax  levy."  As  a  matter  of  fact,  the  re- 
port referred  to  shows  that  the  village  treasurer  collected  a  total 
of  $2,787.02  taxes;  and  of  this  amount  he  paid,  for  — 

Highways •  .     .  $1,075.55  =  40.% 

For  general  expenses  and  fire     ....        806.67  =   30,% 

For  water  (profits,  $1,443) 0=0 

For  electric  light 806.66  =   30% 


Total $2,688.88 

It  also  shows  that  the  — 

Total  expenditures  of  the  electric 
department,  including  interest, 

insurance,  and  taxes,  were  .     .  $4,661.13 

Total  income,  commercial  ....     $4,158.05 

Total  income,  taxes  » 835.53 

4,964.71 

Profits ,.  $303.58 

1  Including  $28.87  uncollected. 

So  that  the  net  payment  out  of  taxes  for  electric  light  was  $531.95 
($835.53  -  $303.58),  which  was  19  per  cent  of  the  taxes  collected, 
instead  of  50  per  cent,  as  stated  by  Francisco.  The  actual  cost 
per  lamp  to  the  taxpayers  for  20  arcs  was  $26.59  per  year,  includ- 
ing interest.  Depreciation  would  add  to  this ;  but  as  taxes  were 
not  used  to  pay  for  depreciation,  and  were  actually  used  to  pay  for 
highways  and  fire  protection,  which  (with  the  balance  left  in  the 
hands  of  the  treasurer)  took  81  per  cent  of  all  the  taxes  collected, 
it  is  difficult  to  see  how  Francisco's  imagination  could  have  dealt 
so  lavishly  with  the  finances  of  Swantou. 


96  MUNICIPAL  MONOPOLIES. 

Francisco  has  also  a  sliding-scale  for  deprecia- 
tion. Where  he  thinks  the  operating  expenses  and 
interest  charges  of  a  municipal  plant  are  high,  and 
do  not  need  much  inflation,  he  calculates  depreci- 
ation at  5  per  cent,  as  in  Braintree  and  Swanton. 
But  when  expenses  are  low,  depreciation  rises  to 
8  per  cent,  as  in  South  Norwalk,  Detroit,  and 
other  places.  I  mention  only  those  places  where 
he  himself  states  the  rate  of  depreciation.  In 
other  cases  I  am  led  to  infer  that  it  vibrates  up 
and  down,  usually  near  the  8  per  cent  pole,  by 
comparing  his  figures  with  those  of  Foster,  who 
uniformly  estimates  depreciation  at  7^  per  cent. 

Turning  now  to  Foster's  investigation,  we  are 
at  once  impressed  with  its  marks  of  candor  and 
ability.  Writing,  as  he  does,  under  conditions 
opposed  to  public  ownership,  it  is  a  matter  of  mo- 
ment that  he  should  publish  such  statements  as 
these :  — 

"The  tone  of  all  communications  from  those  favoring 
the  municipal  side  seems  to  have  taken  it  for  granted  that 
the  results  shown  would  tell  that  side  sufficiently  well ;  and 
it  must  be  admitted  that,  in  quite  a  number  of  cases,  such 
is  the  fact."  Commenting  upon  the  fact  that  the  average 
cost  per  lamp  of  2,000  candle-power  for  installing  a  muni- 
cipal plant  complete  is  shown  to  be  $ 249.30,  and  that  this 
is  very  close  to  the  price  quoted  by  manufacturing  com- 
panies to  private  purchasers,  he  remarks,  "  This  is  seem- 
ingly contrary  to  the  commonly  made  statement,  that 
municipal  plants  are  not  bought  as  cheaply  as  private,  said 


MUNICIPAL   ELECTRIC  LIGHTING.  97 

to  be  due  in  a  measure  to  'jobs.'  Perhaps  these  'jobs' 
may  be  offset  in  the  purchase  of  private  plants  by  the  com- 
mission sometimes  paid  some  member  of  the  company." 
Again,  he  says,  "  In  all  fairness  it  may  be  said  that  the 
much-vaunted  better  management  in  private  hands  does 
not  exist.  In  fact,  the  men  in  charge  of  city  plants  com- 
pare quite  favorably  with  those  in  charge  of  private  plants 
of  similar  size." 

These  statements  seem  to  show  that,  in  his  own 
mind,  whatever  conclusions  others  may  draw  from 
his  figures,  his  careful  investigation  has  not  proven 
what  its  projectors  intended,  viz.,  a  demonstration 
of  the  greater  economy  of  private  electrical  light- 
ing ;  and  his  figures  themselves,  as  will  be  shown 
below,  when  rightly  examined  in  the  light  of  the 
facts  and  of  statistical  rules,  are  not  only  not  a 
disproof  of  the  claims  of  municipal  ownership, 
but  a  strong  testimonjr  in  their  favor. 

Foster  agrees  with  what  I  have  already  stated 
above  with  reference  to  operating  costs ;  i.e.,  that 
there  is  comparatively  little  disagreement  among  the 
returns  made  by  different  investigators.  In  order 
to  show  this,  he  gives  the  following  table  (XXI.), 
from  which  fixed  charges  have  been  excluded. 

Foster  says,  in  commenting  upon  these  figures : 

"  Attention  must  be  called  to  the  remarkable  agreement 
of  cost  in  the  American  municipal  stations  and  the  average 
of  the  English  stations,  and  again  to  that  of  the  six  large 
American  stations  and  the  German  average;  both  of  the 
last  two  are  equipped  with  large  units  in  engines  and  dyna- 


08 


M  UNICIPA  L   MONOPOLIES. 


mos,  which  probably  accounts  for  the  cost  being  lower  than 
in  the  others." 

He  says  also,  — 

"  The  item  of  labor  is  the  one  division  of  operating  ex- 
pense in  which  it  is  claimed  the  greatest  expenditure  will 
be  made  in  municipal  plants.  If  the  average  here  shown 
may  be  considered  accurate  within  reason,  this  belief  is 
largely  a  myth ;  for  (with  the  exception  of  Chicago,  where 
labor  is  53  per  cent  of  the  operating  expenses)  the  percen- 
tage for  labor  is  less  than  usual  in  private  plants.  Either 
very  low  wages  and  very  poor  help  are  the  rule,  or  the  item 
has  been  classed  wrongly." 

TABLE    XXI. 

Comparison  of  Operating  Expenses  per  KW, 


14  American    Municipal    Sta- 

LABOR 
PER 
KW. 

Fuel 

PES 

KW. 

Supplies 

and 
Offices 

PEE  KW. 

Total 
Cost 

PER 

KW. 

tions,  street-lamps  only    . 

■S.025 

$1.0173 

$.0161 

$.0585 

5  American    Municipal    Sta- 

tions, Incandescent      .     . 

.0244 

.0226 

.0126 

.0596 

1  American    Municipal    Sta- 

.0317 

.0199 

.0069 

.0585 

6  American  Private  Stations, 

Mixed  Output  of  5,300,000 

.0095 

.0473 

5  German    Stations,    Output 

1,907,900  kw 

0218 

.0469 

23  English  Stations,  Average, 

0144 

.0222 

.0194 

.0560 

Ideal  English  Stations,  Cromp- 

ton 

0040 

.0054 

.0170 

.0264 

Lowest  Items  in  23  Stations, 

0074 

.0126 

.0173 

.0373 

MUNICIPAL   ELECTRIC  LIGHTING.  99 

FIXED    CHARGES  —  INTEREST. 

It  is  when  we  come  to  the  matter  of  "fixed 
charges,"  including  interest,  depreciation,  insur- 
ance, and  taxes,  that  we  find  the  widest  diver- 
gences between  the  advocates  and  opponents  of 
municipal  ownership.  It  is  here  that  almost  the 
entire  difference  between  the  figures  of  Foster  and 
Parsons  is  to  be  found.  Foster  estimates  interest 
uniformly  upon  the  entire  cost  of  the  plant  up  to 
date  at  the  uniform  rate  of  6  per  cent,  unless 
the  officials  have  given  him  a  different  rate.  As 
the  actual  rate  is  thus  given  in  only  sixteen  of  the 
thirty-four  cities  whose  returns  he  has  tabulated, 
he  has  guessed  at  the  rate  in  eighteen.  In  every 
case  where  I  have  been  able  to  find  the  actual  rate, 
as  against  his  guess,  the  rate  is  4  per  cent.  And 
it  may  be  stated,  as  a  general  rule,  that  the  smaller 
cities  in  the  East  can  borrow  money  without  diffi- 
culty at  4  per  cent,  getting  a  premium  on  the 
bonds  at  this  rate ;  and  in  the  middle  West  no 
higher  rate  than  5  per  cent  is  paid,  rising  to  6  and 
7  on  the  Pacific  coast. 

Oxford,  Ohio,  pays  only  3^  per  cent  on  the 
greater  part  of  its  water  and  electric-light  bonds. 
Chicago  borrows  money  at  3  per  cent,  whereas 
Foster's  gross  interest  charge  for  that  city  figures 
out  4.2  per  cent.  A  difference  of  2  per  cent  on 
the    average    investment   of   $250    per  arc    light 


100  MUNICIPAL  MONOPOLIES. 

makes  a  difference  of  $5  per  year  per  arc  in  the 
aggregate  cost. 

Parsons  estimates  interest,  not  on  the  total  cost 
of  the  plant,  as  does  Foster,  but  upon  the  actual 
amount  of  bonds  outstanding.  Therefore,  if  no 
debt  has  been  incurred  for  the  electrical  plant,  or 
if  the  debt  has  been  paid,  interest  entirely  disap- 
pears from  his  calculation  of  cost.  In  cities  with- 
out a  debt  on  the  plant,  therefore,  the  difference 
between  the  total  costs  of  Foster  and  Parsons 
would  average  $15  per  arc  lamp  per  year. 

Parsons's  reason  for  including  interest,  not  on  the 
entire  cost  of  the  plant,  but  only  on  the  outstand- 
ing debt,  is  that  in  municipal  ownership  the  people 
pay  interest  to  themselves,  except  where  a  debt 
makes  a  creditor  in  effect  part  owner ;  and,  there- 
fore, to  calculate  interest  on  the  total  cost  in  excess 
of  the  debt  would  be  only  to  take  out  of  one  pocket 
and  put  into  another.  This  reason  does  not  appear 
sound.  Taxpayers  and  consumers  are  not  the  same 
individuals,  except  in  street-plants  alone.  The  true 
economic  principle  seems  to  be  as  follows :  — 

The  taxpayers  must  pay  for  street-lighting  either 
to  a  private  company  or  to  a  municipal  plant.  If 
the  cost  of  the  lamps  operated  by  the  latter,  in- 
cluding interest,  depreciation,  and  insurance,  is  less 
than  the  amount  that  would  be  paid  to  a  company, 
the  difference  is  a  saving  to  taxpayers  which  would 
not  occur  except  with  municipal  ownership.     If, 


MUNICIPAL   ELECTRIC  IIGJl'llNG.  101 

therefore,  new  construction  and  payments  on  the 
principal  of  the  debt,  as  far  as  met  out  of  taxes,  do 
not  exceed  the  amount  of  this  saving,  such  dis- 
position of  the  taxpayers'  money  is  not  an  assess- 
ment upon  them,  or  an  investment  made  by  them 
upon  which  interest  should  be  received,  because 
they  have  no  alternative  investment,  and  could 
not  have  gained  interest  upon  it  anyhow  ;  but  it  is 
an  administrative  economy  tending  to  the  ultimate 
extinction  of  the  debt  and  further  lessening  of 
taxes.  The  city  of  Detroit  paid  $175,000  yearly 
for  1,279  private  lights,  and  now  gets  1,716  arc 
equivalents  for  $134,000,  including  interest  and 
depreciation.  The  difference  of  $41,000  yearly, 
if  put  into  new  construction  or  a  sinking-fund,  is 
not  an  increased  burden  upon  the  taxpayers,  and 
therefore  does  not  give  them  a  right  to  charge 
interest  upon  it  to  the  consumers. 

The  city  of  Watervliet,  N.Y.,  has  for  seven  years 
furnished  its  115  arc  lamps  at  a  cost  of  $75  each, 
including  depreciation,  but  not  interest.  Its  neigh- 
bor, Troy,  has  paid  a  private  company  during  the 
same  time  $140  for  .like  service.  Watervliet's 
plant  cost  $26,000,  but  was  paid  for  in  two  assess- 
ments without  the  issue  of  bonds.  Distributed 
over  the  entire  period,  this  investment  would  have 
been  equivalent  to  $31  per  lamp-year,  making  the 
total  expense  to  the  taxpayers  $106,  against  the 
$146   paid  by   Troy.      It  is   proper  enough   that 


10-2  Mr_M<  I  PAL   MONOPOLIES. 

interest  should  be  omitted  from  the  computation 
of  Watervliet's  annual  expense  ;  and,  should  a  com- 
mercial system  be  added,  the  consumers  should 
have  the  benefit  of  charges  based  on  freedom  from 
interest  payments.  Therefore,  while  criticising 
Parsons's  reasons,  I  agree  that  both  he  and  city 
officials  are  right  in  figuring  interest  only  on  the 
outstanding  debt.  This  gives  the  true  cost  of 
production  to  the  taxpayers,  and  the  saving  of 
interest  in  this  way  must  be  counted  as  one  of  the 
most  important  economies  which  municipal  owner- 
ship brings.  This  saving,  of  course,  does  not 
appear  prominently  in  the  early  years  of  the  enter- 
prise ;  but  it  becomes  increasingly  valuable  as  fast 
as  the  debt  is  liquidated.  Foster's  computation  of 
interest  at  6  per  cent  on  the  entire  cost  of  plant 
to  date  is  therefore  doubly  excessive ;  for,  besides 
the  falsely  high  rate,  it  includes  interest  on  con- 
struction paid  out  of  profits  and  savings  which 
are  not  properly  considered  an  investment  and 
entitled  to  interest  payments. 

TAXES. 

The  amount  of  taxes  paid  by  electric-light  com- 
panies varies  so  widely  in  different  States  and 
cities  that  it  is  impossible  to  state  a  rule  that  will 
have  general  application.  Parsons  says  that  the 
amount  actually  paid  by  the  companies  is  about 
two  dollars  per  arc  equivalent,  or  -£  of  .1  per  cent 


MUNICIPAL   ELECTRIC  LIGHTING.         103 

to  1  ner  cent  on  the  fair  investment.  In  New 
York  City,  according  to  the  census  report,  it  was 
I  of  1  per  cent  on  the  total  valuation,  or,  omit- 
ting patents,  ^o  of  1  per  cent.  In  the  State  at 
large  it  was  \  of  1  per  cent. 

According  to  the  report  of  the  Massachusetts  Gas  and 
Electric  Light  Commissioners,  the  total  amount  of  taxes 
paid  by  all  the  electric-light  companies  of  the  State  for  the 
year  ending  June  30,  1896,  was  $168,218.83,  which  was 
4  per  cent  of  their  gross  receipts  ($4,187,260),  6/g-  per  cent 
of  their  operating  expenses  ($2,739,783),  and  1.06  per  cent 
of  their  total  assets  ($15,892,336).  The  two  Boston  com- 
panies, with  the  equivalent  of  22,970  arc  lamps  of  2,000 
capacity  each,  installed  for  both  street  and  commercial 
lighting  and  motors,  paid  in  1896  taxes  amounting  to 
$72,333.96,  being  $4.42  per  arc  equivalent,  and  1.05  per 
cent  on  the  combined  assets  of  the  companies  ($6,898,786). 

The  Edison  Illuminating  Company  of  New  York,  with 
the  equivalent  of  42,582  arcs,  installed  in  1895,  paid  for 
"general  and  legal  expenses  and  taxes,"  $218,421,  equal 
to  $5.13  per  arc,  showing  taxes  to  be  much  less  than  in 
Boston. 

The  Detroit  assessors  at  the  request  of  the  Public  Light- 
ing Commission  placed  an  assessed  valuation  on  the  city 
plant  at  $427,500,  the  amount  of  the  investment  for  the 
year  having  been  $714,843.76.  Computing  city  taxes  on 
this  valuation,  the  loss  to  the  city  in  taxes  was  $7,981,43, 
or  $5.10  per  arc  light,  or  1-^  per  cent  on  the  cash  invest- 
ment. 

The  Massachusetts  rate  of  taxation  on  corpora- 
tions is  unquestionably  higher  than  that  in   any 


104  MUNICIPAL   MONOPOLIES. 

other  State,  and  the  rate  of  1  per  cent  on  the  total 
investment  may,  therefore,  be  taken  as  the  maxi- 
mum taxes  which  the  city  loses  through  municipal 
ownership.  But  it  is  a  mistake  to  consider  this 
as  a  loss  to  the  taxpayers.  It  is  more  than  com- 
pensated by  the  increased  valuations  of  property 
which  follow  upon  increased  municipal  lighting. 
In  Jamestown,  N.Y.,  the  extension  of  lamps  to 
the  suburbs  and  to  unimproved  property  has  con- 
tributed largely  to  the  building  up  of  outlying 
areas,  and  the  consequent  increase  of  assessed 
valuation.  Where  there  is  a  commercial  plant, 
the  reduction  of  25  to  50  per  cent  in  commercial 
rates  increases  the  profits  of  business,  and  hence 
the  valuation  of  real  estate  and  business  holdings. 
This  tends  to  lessen  the  tax  rate. 

But  this  is  not  all.  There  is  also  an  actual 
distribution  of  profits  among  the  taxpayers,  not 
otherwise  taken  into  account  in  any  part  of  this 
essay,  following  upon  the  improved  j)rocesses  and 
lessened  costs  of  production.  Where  the  price  is 
fixed  by  contract  with  a  private  company,  this 
lessened  cost  goes,  of  course,  to  swell  the  dividends 
of  the  company,  and  appears  as  the  increased 
market  value  of  the  stocks  and  bonds.  When 
owned  by  the  city  this  reduction  goes  directly  to 
the  taxpayers.  For  example,  the  average  cost 
per  lamp  per  night  of  the  municipal  plant  of 
South  Norwalk,  Conn.,  shows  in  five  years  a  total 


MUNICIPAL   ELECTRIC  LIGHTING.  105 

reduction  in  cost  of  2.35  cents,  or  17.23  per  lamp 
per  year,  as  follows  :  — 

Average  cost  per  lamp  per  night,  1,200  c.  p.,  South  Norwalk. 
Year  ending  Oct.  12,  1893  .  .  20.75  cents. 
Year  ending  Oct.  12,  1894  .  .  19.20  cents. 
Year  ending  Oct.  12,  1895  .  .  19.00  cents. 
Year  ending  Oct.  12,  1896  .  .  18.60  cents. 
Year  ending  Oct.  12,  1897    .     .     17.40  cents. 

Reduction  in  five  years,  2.35  cents  per  night. 
The  average  number  of  nights  being  308,  the  sav- 
ing per  lamp  per  year  is  |7.23,  or  1723  for  the 
100  lamps  actually  burned.  This  saving,  if  cap- 
italized at  double  the  current  rate  of  interest1 
paid  by  a  private  business,  or  10  per  cent,  would 
have  shown  itself  in  an  increased  market  value  of 
the  stocks  and  bonds  of  the  company,  amounting 
to  $7,230  on  a  business  where  the  actual  cost  of 
construction  was  $20,000,  an  increase  of  30  per 
cent  in  the  capitalization.  The  tax  on  the  plant 
at  1  per  cent  would  be  only  $272.30,  so  that  the 
saving  for  the  fifth  year  to  the  taxpayers  is  three 
times  the  loss  in  taxes. 

The  city  of  Manchester,  Eng.,  has  reduced  the 
cost  of  production  of  light  and  power  sold  to  cus- 
tomers from  3d.  (6  cents)  per  kilowatt-hour  (ex- 
clusive of  fixed  charges)  in  1893-1891  to  2.17c?. 
in  1894-1895,  1.80(7.  in  1895-1896,  and  lAQd. 

1  See  Commons,  "The  Distribution  of  Wealth,"  New  York, 
1893,  pp.  193,  and  239  ff. 


106  MUNICIPAL  MONOPOLIES. 

(2.92  cents)  in  1896-1897,  a  reduction  of  51  & 
per  cent  in  cost  of  operation.1  Taking  the  esti- 
mate of  1800  kilowatt-hours  as  the  consumption 
of  a  2,000  c.  p.  arc  light  of  450  watts  burning  4,000 
hours,  or  one  year,  it  will  be  seen  that  this  reduc- 
tion in  cost  of  2.92  cents  per  kw.  amounts  to  a 
reduction  in  the  arc  light  from  $108  per  year  in 
1893-1894  to  $52.56  in  1896-1897,  or  a  saving 
of  $55.44  per  lamp.  On  a  five-year  contract 
given  to  a  private  company  at  the  cost  of  operation 
in  1893-1894,  Manchester  taxpayers  would,  of 
course,  have  lost  this  reduction  in  costs  of  produc- 
tion; but,  having  secured  the  reduction  to  them- 
selves through  municipal  ownership,  it  appears  in 
lessened  taxes  and  therefore  higher  capitalization 
of  their  own  taxable  property,  rather  than  in  higher 
capitalization  of  a  private  electrical  plant.  So 
great  is  this  saving  in  all  municipal  plants,  conse- 
quent on  improved  machinery  and  the  economies 
that  follow  increasing  output  from  year  to  year, 
that  it  far  exceeds  the  highest  estimate  of  the 
loss  of  taxes  which  can  fairly  be  charged  against 
municipal  ownership.  Seeing  that  in  no  other 
connection  have  I  made  allowance  for  this  item, 
we  are  justified  in  setting  it  off  at  this  point 
against  the  item  of  lost  taxes,  and  therefore  to 
omit  the  latter  item  altogether,  as  an  element  in 
the  cost  of  municipal  lighting.     It  will  be  seen 

1  The  Electrician,  Dec.  3,  1897,  p.  197. 


MUNICIPAL  ELECTRIC  LIGHTING.  107 

that  this  amounts  to  a  difference  of  $2  to  $5  per 
arc  light  in  the  final  balance.1 

1  The  following  extract,  from  London  of  April  21,  1898,  gives 
added  force  to  the  statement  in  the  text:  "That  the  tendency 
is  to  reduce  the  cost  of  generation  and  distribution  of  electrical 
energy  as  the  work  extends,  and  as  time  goes  on,  was  proved  by 
Mr.  Robert  Hammond  in  the  important  paper  he  recently  read 
before  the  Institution  of  Electrical  Engineers.  Mr.  Hammond  is 
an  expert  at  analyzing  accounts,  and  his  careful  and  elaborate 
tables  form  the  most  complete  inquiry  into  the  cost  of  production 
which  has  been  produced.  His  tables  show  that  in  some  cases 
the  charge  for  current  has  been  reduced  to  such  an  extent  that 
some  of  the  towns  are  now  able  to  supply  it  at  1^  d.  (3  cents)  per 
unit  (k.w.)  for  all  consumption  beyond  the  average  of  one  hour 
per  day.  [See  description  of  Brighton  meter  system  above.]  The 
total  cost  per  unit  sold,  which  includes  management,  expenses, 
rent,  taxes,  etc.,  gets  less  every  year.  Bradford  municipal  corpo- 
ration, for  instance,  where  the  first  year  the  cost  was  4.58  d.  (9.16 
cents),  has  been  gradually  reduced  to  1.81  d.  (3.G2  cents).  At 
Brighton  the  cost  began  at  3.76  d.  (7.52  cents),  and  has  decreased 
to  2.01  d.  (4.08  cents).  In  Manchester  the  total  cost  in  1894  was 
2.17  d.  (4.34  cents),  and  it  is  now  reduced  to  1.45  d.  (2.90  cents). 
In  Glasgow  the  cost  began  at  4.51  d.  (9.02  cents),  and  decreased 
to  1.92  d.  (3.84  cents).  The  total  cost  in  the  first  year  of  the 
Hampstead  supply  was  6.66  d.  (13.32  cents),  which  was  excep- 
tionally high.  In  the  second  year  it  was  reduced  by  more  than 
one-half,  being  3.30  d.  (6.60  cents).  In  Islington  the  first  year 
cost  4.58  d.  (9.16  cents),  the  second  3.57  d.  (7.14  cents).  In  St. 
Pancras  the  cost  has  been  reduced  from  4.66  d.  (9.32  cents)  to 
3.30  d.  (6.60  cents).  In  some  of  the  more  successful  London  pri- 
vate companies  the  cost  has  been  reduced  to  a  still  lower  figure 
as  their  supply  extends.  In  the  City  of  London  Company  the 
total  cost  of  production  has  been  reduced  to  3j  d.  (7  cents), 
although  the  price  per  unit  sold  is  8  d.  (16  cents),  which  is  the 
highest  charge  in  the  country,  as  it  is  the  same  for  heat  and 
power  as  for  illuminating  purposes.  The  difference  between  the 
cost  of  production  and  the  price  of  current  is  the  penalty  which 
the  city  pays  for  having  allowed  this  profitable  monopoly  to  be 
established.  It  is  able  to  pay  a  dividend  of  7  per  cent,  to  pay 
£16,000  interest  on  loans,  and  set  aside  more  than  that  amount 
for  depreciation." 


108  MUNICIPAL   MONOPOLIES. 

INSURANCE. 

Insurance  actually  paid  is  usually  entered  in  op- 
erating expenses,  and  need  not  be  added  as  a  fixed 
charge.  It  is  a  small  item,  J  of  1  per  cent  in  Bata- 
via,  nothing  in  Dunkirk,  1  per  cent  in  Watervliet, 
t^o  of  1  per  cent  in  Jamestown,  computed  upon  the 
total  cost  of  the  plant.  The  larger  cities,  Detroit 
and  Chicago,  do  not  carry  insurance.  This  is 
proper  enough  for  a  large  city,  where  the  loss  by 
fire  when  spread  over  the  tax-rolls  would  cause 
but  an  insignificant  increase  in  taxes ;  but  small 
towns  like  Tipton,  Iowa,  whose  plant  was  destroyed 
by  fire,  are  unable  to  rebuild,  especially  if  already 
in  debt. 

Insurance  need  not  in  itself  be  included  as  an 
additional  expense  to  be  estimated  in  calculating 
the  cost  of  municipal  ownership.  If,  however,  it 
is  not  included  by  municipalities  in  their  operating 
expenses,  it  should  be  represented  in  a  sinking- 
fund,  which  will  be  considered  below. 

DEPRECIATION. 

Depreciation  is  the  item  of  keenest  dispute  in  the 
contest  over  municipal  electric  lighting.  Francisco 
quotes  electrical  engineers  who  assert  that  the  de- 
preciation on  engines  and  boilers  is  5  per  cent,  and 
on  electrical  apparatus,  lamps,  and  dynamos,  10  per 


MUNICIPAL   ELECTRIC  LIGHTING. 


109 


cent.  He  does  not  itemize  any  other  parts  of  a 
plant;  and,  taking  these  two,  the  depreciation  for 
the  first  year  on  the  total  cost  of  the  Detroit  plant 
would  be  l^j  per  cent,  as  follows,  instead  of  8  per 
cent,  as  usually  estimated  by  him  :  — 


TABLE  XXII. 
Estimated  Depreciation  on  Detroit  Municipal  Plant,  1895-1896. 


Cost. 

Rate  Per  Cent 
of  Deprecia- 
tion. 

Amount  of 
Deprecia- 
tion. 

$82,152 
29,628 
40,842 

477,519 

5 
10 
10 

0 

$4,107 

2,962 

4,084 

0 

Arc  lamps 

Electric  plant     .     .     . 
Balance  of  entire  plant 
Net  cost  of  plant  to  date 

$630,141 

1.4 

$9,153 

Parsons  arrives  at  his  estimate  of  3  per  cent  de- 
preciation as  shown  in  Table  XXIII.,  taking  the 
Braintree  plant  as  an  example. 

For  an  underground  plant  like  that  of  Chicago, 
he  figures  the  depreciation  at  one  and  six-tenths 
per  cent  of  the  total  investment,  as  in  Table  XXIV. 

The  estimates  for  depreciation  as  here  given  are, 
of  course,  not  actually  written  off  by  the  municipal 
officials,  but  are  calculations  made  by  Parsons.  In 
fact,  it  is  almost  invariably  the  rule  that  the  mana- 
gers of  municipal  plants  make  no  allowance  what- 
ever for  depreciation.  Foster  complains  that  in  but 
two  instances  (South  Norwalk,  Conn.,  and  Rock- 
port,  Mo.)  have  the  authorities  reporting  to  him 


110 


MUNICIPAL   MONOPOLIES. 


TABLE     XXIII.        Braintree  —  Distribution    of    Investment 
and  Depreciation.  —  Parsons. 


Land 

Buildings 

Steam  plant   .     .     .     „    . 
Electric  plant     .... 

Lines      

Poles 

Lamps 

Meters 

Transformers      .... 
Tools  and  furniture     .     . 

Supplies 

Services  of  architect  and 

engineer  

Total 


Invest- 
ment. 


&      940 

6,630 

11,900 

7,640 

13,580 

3,630 

4,630 

1,560 

2,280 

580 

610 

620 


$54,600 


Per  Cent  of 
Depreciation. 


0 
1 
4 
3 
1 

10 
4 
2 
3 
8 
0 

0 


2.9 


Amount  of 
Deprecia- 
tion. 


i  o 

66 

476 

229 

136 

363 

185 

31 

68 

46 

0 

0 


$1,600 


TABLE  XXIV.       Chicago  —  Distribution  of  Investment  and 
Depreciation.  —  Parsons. 


Land 

Buildings .... 
Steam  plant .  .  . 
Electric  plant   .     . 

Lines    

Poles 

Lamps 

Tools  and  furniture 

Supplies   .... 

Total    .... 


Invest- 
ment. 


$100,000 

66,987 

95,518 

58,075 

317,040 

41,240 
610 

8,840 


1688,310 


Per  Cent  of 
Depreciation. 


1.6 


Amount  of 
Deprecia- 
tion. 


5      o 

669 
3,820 
1,742 
3,170 

1,650 

50 

0 


$11,101 


made  allowance  for  this  item.     If  they  mention  it 
at  all,  they  usually  say  that  they  keep  their  plant  in 


MUNICIPAL   ELECTRIC  LIGHTING.  Ill 

good  working  condition,  making  repairs  promptly ; 
and  that  repairs  and  renewals,  which  are  charged 
to  operating  expenses,  wholly  cover  depreciation. 
So  unusual  is  it  for  cities  to  make  this  separate 
charge  that  it  is  of  interest  to  notice  the  exceptions. 
In  the  first  annual  report  of  the  Detroit  commis- 
sioners no  attempt  was  made  to  figure  a  deprecia- 
tion ;  hut  in  the  second  report  it  was  stated  :  "  The 
entire  equipment  is  maintained  in  the  best  possible 
condition  of  repair,  so  that  the  cost  chargeable  to 
depreciation  is  reduced  to  a  minimum.  The  only 
part  that  in  time  will  have  to  be  replaced  in  an 
entirety  is  the  boilers,  and  experience  has  shown 
that  their  life  should  be  20  to  25  years.  Four  per 
cent  of  their  cost  is  therefore  added  to  the  cost  of 
a  lamp,  or  $1.85  to  the  cost  of  an  arc,  and  12  cents 
to  the  cost  of  an  incandescent  lamp." 

In  the  South  Norwalk  plant,  depreciation  is 
charged  in  1896  at  5  percent  against  "all  appara- 
tus and  material  subject  to  wear  and  tear  "  to  the 
value  of  <f  15,576,  making  a  total  amount  of  8777.46, 
or  3^  per  cent  on  the  total  cost  of  $22,694. 

These  two  cases  are  indeed  exceptions  to  the  gen- 
eral rule.  But  it  is  to  be  noticed  that,  even  in 
these"  cases,  depreciation  is  only  an  estimate  of  cu- 
rious interest,  and. does  not  actually  enter  into  the 
book-keeping  of  the  plants,  nor  is  the  depreciation 
actually  written  off  from  the  capital.  It  is  pre- 
sented only  as  a  matter  of  public  interest  in  making 


112 


MUNICIPAL   MONOPOLIES. 


comparisons  with  the  charges  of  private  companies. 
The  Herkimer  commission  states  the  matter  as 
follows.  They  say,  "  We  formulate  as  a  matter 
of  general  interest  these  propositions :  — 


Cost  per 

Lamp 
pee  Year. 

Cost  per 

Lamp 
per  Hour. 

Candle- 
Power 
FORI  cent. 

First  Proposition, — 
Actual    operating    ex- 
penses, 55  lamps   of 

2,000  C.  P 

Second  Proposition,  — 
Actual    operating    ex- 
penses, 55  lamps    .     . 
Add   1  year's    interest 

Operating  expenses  and 

Third  Proposition,  — 
Operating  expenses  and 
interest  for  55  lamps  . 
Add  5%  depreciation  on 
plant,  $1(5,858.53    .     . 
Operating  expenses,  in- 
terest, and  deprecia- 
tion   

$3,269.87 

3,269.87 
560.00 

$59.45 
69.63 

84.96 

$.0202 
.0237 

.0289 

988 
844 

692" 

$3,829.87 

3,829.87 
842.93 

$4,672.80 

That  American  cities  should  neglect  to  write 
off  depreciation  is  not  to  their  discredit  compared 
with  private  corporations.  Foster  says  (p.  184), 
"  It  is  but  fair  to  say,  that,  in  a  comparison  of 
municipal  with  private  plants,  the  charging  off 
for  depreciation  and  interest  is  fully  as  much 
neglected  by  one  as  by  the  other,  less  than  one 
in  ten  of  either  paying  any  attention   whatever 


MUNICIPAL   ELECTRIC  LIGHTING.  113 

to  these  items."  The  report  of  the  Massachu- 
setts Gas  and  Electric  Light  Commissioners  shows 
that,  in  1896,  the  electric-light  companies  of  that 
State  set  aside  for  depreciation  funds  1-146,662.89, 
which  was  3  per  cent  of  the  total  assets  of  the 
companies;  $250,000  of  this  was  credited  to  one 
company,  the  Boston  Electric.  Of  the  83  com- 
panies in  the  State,  only  33  made  an  account  of 
depreciation ;  and  apart  from  the  Boston  Electric, 
whose  depreciation  was  8  per  cent  of  its  assets 
and  15  per  cent  of  its  capital  stock,  and  the  Edison 
of  Boston,  whose  depreciation  was  2T8o  per  cent 
of  the  capital  stock  and  2T3o  per  cent  of  the  assets, 
the  depreciation  entered  by  the  other  31  companies 
was  less  than  \  of  1  per  cent.  The  Edison  Illu- 
minating Company  of  New  York,  in  1894,  for  the 
first  time  carried  a  part  of  its  profits  to  a  deprecia- 
tion fund ;  and  the  directors,  remarking  upon  the 
novelty  of  the  transaction,  wrote :  "  This  conser- 
vative course  will  no  doubt  commend  itself  to  the 
stockholders." 

As  to  these  private  companies,  it  does  not  follow, 
because  they  carry  a  depreciation  fund,  that  they 
have  actually  written  any  depreciation  off  from 
their  capital  investment.  The  proper  method 
would  be  to  deduct  depreciation  from  the  capital, 
and  to  add  new  construction,  giving  at  the  end 
of  each  year  a  new  net  capital  investment ;  but, 
as  the  companies  are  usually  stocked  and  bonded 


114  MUNICIPAL  MONOPOLIES. 

at  a  high  figure,  it  is  of  some  advantage  to  them 
to  keep  adding  new  construction  to  their  construc- 
tion accounts  without  deducting  depreciation,  thus 
actually  inflating  their  apparent  investments.  The 
depreciation  fund  which  they  carry  is  therefore 
merely  a  part  of  a  larger  policy  which  conservative 
corporations  adopt,  namely,  the  accumulation  of 
a  surplus  in  the  treasury  of  the  company,  rather 
than  the  distribution  of  this  surplus  in  dividends 
to  stockholders.  This  surplus  may  be  invested  in 
stocks  and  bonds  of  its  own,  or  of  other  companies, 
or  may  appear  in  several  different  forms,  such  as 
profit  and  loss,  depreciation  fund,  reserve  fund, 
or  insurance  fund.  By  a  policy  of  this  kind  the 
stockholders,  though  getting  smaller  dividends  for 
the  time,  are  nevertheless,  while  keeping  up  their 
plant  by  repairs,  renewals,  new  construction,  and 
operating  expenses,  increasing  the  market  value 
of  their  stock,  and  their  capacity  to  buy  up  and 
absorb  other  corporations  and  competitors,  besides 
also  giving  added  security  to  their  bonds,  and  in- 
creasing the  company's  ability  to  borrow  money 
at  low  rates. 

Now,  these  conditions  are  wholly  absent  from 
a  municipal  corporation  owning  and  operating  an 
electrical  plant.  The  taxpayers  do  not  hold  negoti- 
able stock  in  the  plant,  which  they  may  wish  to 
hypothecate  and  so  desire  to  have  it  backed  by  the 
possession  of  a  reserve  fund.     They  do  not  want 


MUNICIPAL   ELECTRIC  LIGHTING.         115 

the  electrical  plant  to  accumulate  a  surplus  to  be 
invested  in  securities  against  either  future  exten- 
sions of  the  business  or  replacements  of  worn-out 
machinery.  The  city  is  not  a  business  corporation 
empowered  to  reinvest  the  earnings  of  its  stock- 
holders, the  taxpayers ;  but  the  latter  want  to  re- 
invest their  own  money  in  their  own  way,  and 
under  their  own  individual  control.  Hence  they 
want  their  dividends  at  once  for  private  purposes 
in  the  form  of  low  taxes  or  low  charges.  This 
leaves  no  room  for  the  accumulation  of  a  reserve, 
by  whatever  name  it  may  be  known.  If  the  mu- 
nicipality is  to  take  account  of  the  depreciation  at 
all,  it  is  not  in  the  form  of  a  surplus  fund  on  which 
the  future  taxpayers  may  draw  in  case  of  exigency, 
but  it  is  in  the  form  of  such  a  provision  for  the  dis- 
tribution of  depreciation  over  successive  years  that 
the  taxpayers  of  no  single  year  will  be  unduly 
oppressed.  This  will  appear  more  clearly  if  we 
consider  the  true  nature  of  the  depreciation. 

There  are  three  kinds  of  depreciation  to  be  taken 
into  account,  —  depreciation  by  use,  depreciation 
by  competitive  improvements,  and  depreciation  by 
replacements. 

Depreciation  by  use  is  the  actual  wear  and  tear 
upon  machinery,  the  burning  out  of  armatures,  the 
breaking  of  globes  and  lamps,  the  crippling  of 
tools,  the  weathering  of  paint,  poles,  lines,  and  so 
on.     This  kind  of  depreciation  is  entirely  covered 


116  MUNICIPAL   MONOPOLIES. 

by  the  item  of  repairs  and  renewals,  properly- 
chargeable  to  operating  expenses,,  and  is  so  entered 
by  every  honest  official.  It  does  not  need  addi- 
tional provision  under  fixed  charges.  However,  it 
eventually  contributes  to  the  third  form  of  de- 
preciation, that  of  replacement. 

Depreciation  by  competitive  improvements  con- 
sists in  the  lower  cost  of  operation  and  maintenance 
which  new  inventions  and  improved  machinery 
have  introduced  since  the  installation  of  the  plant. 
It  is  asserted  now  that  the  saving  effected  in  arc 
lighting  by  substituting  100  and  125  arc  dynamos 
for  the  35  and  50  arc  dynamos  of  the  earlier  days 
is  40  per  cent  of  the  maintenance.  In  the  direct- 
current  sendee  the  large  units  effect  a  saving  of 
20  per  cent,  which  is  increased  even  to  50  per 
cent  by  being  directly  connected  to  the  shaft  of 
the  engine  instead  of  being  belted.  In  alternat- 
ing currents  the  difference  is  less;  but  the  lower 
speed,  lower  temperature,  and  ability  to  run  con- 
tinuously make  their  adoption  a  commercial  gain. 
Such  striking  improvements  in  electrical  machi- 
nery within  ten  years  render  the  plants  of  that 
length  of  service  quite  antiquated.  Were  the 
business  a  competitive  one,  and  readily  open  to 
new  companies,  there  could  be  no  question  that 
the  private  plants  installed  a  few  years  ago  would 
all  now  be  bankrupt,  in  so  far  as  they  have  not 
met  the  improvements  of  the  day  by  substituting 


MUNICIPAL   ELECTRIC   LIGHTING.  117 

new  machinery.  But  having  u  monopoly,  and 
being  able  to  charge  the  prices  of  a  decade  ago, 
they  are  protected  in  the  use  of  antiquated  ma- 
chinery, and  need  introduce  the  new  appliances 
only  with  the  extension  of  new  business.  This 
kind  of  depreciation  in  a  competitive  business 
would  be  corrected  by  writing  off  depreciation  from 
the  capitalization,  and  the  market  value  of  the 
stock  would  sink  gradually  until  bankruptcy  or 
reconstruction  ended  it.  But  in  a  monopolistic 
business  the  power  to  keep  up  old  rates  is  the  power 
to  withstand  the  pressure  of  competitive  improve- 
ments. This  is  the  very  reason  why,  in  such  a 
business,  municipal  ownership,  or  at  least  muni- 
cipal regulation  of  charges,  is  demanded.  And  if 
the  municipality,  in  case  of  ownership,  did  not 
choose  to  put  in  the  new  machinery  before  the  old 
should  wear  out,  the  consumers  certainly  would 
be  no  worse  off  than  with  private  monopoly. 
Certain  it  is  that  the  charges  by  private  com- 
panies for  either  public  or  private  lighting  have 
not  fallen  in  porportion  to  the  great  improvements 
in  production,  even  where  the  companies  have  been 
enterprising  enough  to  replace  the  old  by  the  new 
machine.  It  is  this  kind  of  depreciation  by  com- 
petitive improvements  that  experts  have  in  mind 
when  they  place  depreciation  at  10  per  cent.  For 
certainly  the  life  of  a  dynamo  is  equal  to  the  life 
of  an  engine  if  it  be  equally  well  cared  for  and  if 


118  MUNICIPAL   MONOPOLIES. 

repairs  are  made  as  needed,  and  the  depreciation  by 
use  in  either  case  would  not  shorten  the  life  of  the 
apparatus  to  less  than  thirty  or  forty  years.  De- 
preciation by  competitive  improvements  is  not  to 
be  computed  as  a  fixed  charge ;  since  it  already 
shows  itself  in  operating  expenses  by  relatively 
high  cost  of  fuel,  labor,  repairs,  etc.,  compared  with 
those  plants  that  have  new  machinery. 

Depreciation  by  replacement  occurs  as  a  result 
of  the  other  two  forms  of  depreciation,  when  old 
machinery,  through  wear  and  tear  and  in  view  of 
improvements,  is  sold  out,  and  new  is  put  in  its 
place.  When  this  shall  occur  depends  upon  the 
policy  of  the  management.  It  may  be  to  the  ad- 
vantage of  an  enterprise  to  retain  old  machinery, 
thereby  increasing  the  operating  expenses,  rather 
than  incur  the  expense  of  replacements  for  the  sake 
of  the  estimated  savings  in  operation.  A  few  en- 
terprising private  companies  have  already  begun 
to  reconstruct  their  electrical  plants,  not  because 
of  depreciation  by  use,  nor  by  competition,  but 
because  the  saving  with  new  improvements  more 
than  covers  profits  on  the  cost  of  reconstruction. 
As  a  rule,  however,  in  a  monopolistic  business  of 
this  kind,  replacement  does  not  occur  until  depre- 
ciation by  use  has  advanced  so  far  that  repairs  and 
renewal  of  minor  parts  fail  to  maintain  the  effi- 
ciency of  the  plant.  Whether  in  the  case  of  a  city 
or  a  company,  the  financial  circumstances  of  the 


MUNICIPAL    ELECTRIC  LIGHTING.  119 

owners  determine  how  long  they  shall  wait  before 
selling  the  old  and  substituting  the  new.  On  this 
basis  it  will  be  safe  on  the  whole  to  estimate  that 
the  entire  depreciable  part  of  the  plant,  including 
steam  and  electric  plants,  poles,  lines,  meters,  trans- 
formers, lamps,  should  be  replaced  every  twenty 
to  thirty  years.  This  replacement  would  not  occur 
all  at  once,  but  would  be  distributed  throughout 
the  period. 

We  can  now  make  plain  another  reason  why  a 
city  need  not  accumulate  a  depreciation  fund,  and 
why  a  private  company  must  do  so.  In  a  city  the 
entire  taxable  property  of  the  citizens  is  liable  to 
assessment  when  the  time  arrives  for  purchasing 
new  machinery  in  place  of  old,  while  in  a  private 
company  only  the  capital  actually  invested  is  so 
liable.  In  the  former  case,  therefore,  the  increased 
tax-rate  for  replacements  would  be  so  insignificant 
as  to  need  almost  no  consideration;  in  the  latter 
it  would  wipe  out  the  dividends,  and  reduce  the 
capital  stock  to  a  mere  speculative  interest.  For 
example,  the  assessed  valuation  of  taxable  property 
in  Detroit  is  $209,586,330.  The  tax-rate  for  all 
purposes  is  15 /g-  mills  on  the  dollar.  The  entire 
lighting-plant  cost  $729,222.  The  electrical  part 
of  the  plant  cost  $63,701.  Supposing  this  part 
were  to  be  entirely  replaced  in  a  single  year,  the 
tax  necessaiy  for  the  purpose  would  be  only  T3<y  of 
one  mill,  which  would  increase  the  tax-rate  from 


120  MUNICIPAL   MONOPOLIES. 

15  ^  mills  to  16  mills.  If  the  same  assessment 
were  levied  on  a  private  company  which  had  in- 
vested $730,000  in  the  enterprise,  the  rate  would 
be  8^0  percent  (87  mills  on  the  dollar).  But  the 
entire  electric  plant  would  not  need  reconstruction 
in  a  single  year.  Its  replacement,  together  with 
that  of  the  entire  depreciable  part  of  the  plant, 
could  be  distributed  over,  say,  twenty  years.  This 
depreciable  part  of  the  Detroit  plant  is  $431,186, 
making  $21,559  to  be  replaced  each  year.  On  the 
entire  taxable  property  of  the  city  this  would  be  a 
rate  of  only  j^  of  a  mill,  bringing  the  total  rate  to 
15.96  mills.  On  the  private  capital  invested  this 
would  be  a  tax  of  3  per  cent,  or  30  mills  on  the 
dollar.  But  this  is  not  all.  The  private  plant 
would,  of  course,  be  bonded  for  one-half  its  value, 
and  the  interest  on  the  bonded  debt  at  6  per  cent 
would  be  a  prior  lien  on  the  earnings.  Conse- 
quently, the  cost  of  replacement  would  come  out 
of  the  stockholders,  representing  but  one-half  the 
investment.  The  assessment  on  stock  for  repla- 
cing one-twentieth  of  the  depreciable  plant  would, 
therefore,  be  6  per  cent  as  against  the  tooo  of  1 
per  cent  which  the  taxpayers  would  be  assessed. 
The  capital  stock  in  the  one  case  would  be  wiped 
out,  but  in  the  other  the  taxpayers  would  be  un- 
affected. Even  this  comparison  is  unfair  to  the 
city  of  Detroit ;  for  it  must  be  remembered  that,  in 
1893  and  1894,  the  tax  on  property  for  lighting 


MUNICIPAL   ELECTRIC  LIGHTING.  121 

t 

by  a  private  company  was  1175,000  yearly  for 
1,279  lamps  ;  while  now  it  is  only  $134,000  yearly 
for  all  operating  expenses,  interest,  and  depreciation 
on  1,700  arc  equivalents.  This  leaves  a  balance 
of  at  least  840,000  yearly,  minus  sinking-fund  and 
new  construction,  without  considering  the  increased 
lighting,  on  which  to  draw  for  replacements  when 
needed,  before  the  expense  can  be  said  to  approach 
that  of  private  lighting.  Under  such  circum- 
stances I  do  not  see  how  the  municipal  authorities 
can  be  charged  with  "  bad  book-keeping."  Judged 
by  private  standards  they  could  be  so  charged; 
and  those  thousands  of  private  companies  which 
are  now  distributing  what  ought  to  be  their  reserve 
funds  in  dividends  to  stockholders  are  either  pre- 
suming upon  their  power  to  force  the  public  to 
pay  for  replacements  when  they  come,  or  their 
shrewdness  in  bolstering  their  stock,  and  entrap- 
ping future  innocent  stockholders  who  in  turn 
must  reckon  with  the  municipalities. 

Below  is  a  table  showing  the  facts  just  stated 
concerning  Detroit,  together  with  comparative 
tables  for  smaller  places.  It  will  be  seen  that 
small  places,  with  heavier  investments  relative  to 
taxable  property  than  Detroit,  must  incur  a  heavier 
tax-rate  for  replacements.  This  rate  is  T5o  of  one 
mill  in  Braintree,  and  fo  of  one  mill  in  Reading, 
Mass.,  to  replace  one-twentieth  of  the  depreciable 
plant,  a  rate  two  and  three  times  the  estimated  rate 


122  MUNICIPAL  MONOPOLIES. 

* 

in  Detroit.  But  the  Braintree  and  Reading  plants 
are  both  commercial  and  street  plants ;  and  this 
brings  in  a  new  consideration,  namely,  the  relations 
between  taxpayers  and  consumers  in  the  mainte- 
nance of  the  electrical  works. 

Heretofore  I  have  considered  only  those  cities 
in  which  the  municipal  plant  is  limited  to  street- 
lighting.  In  such  cities  the  'taxpayers  alone  are 
concerned  as  to  the  charges  for  depreciation.  But 
the  inevitable  tendency  of  .municipal  ownership  is 
to  enter  the  commercial  field.  Every  one  of  the 
municipalities  owning  plants  in  Massachusetts  has 
already  added,  or  voted  to  add,  this  branch  to  its 
municipal  plant.  The  advantages  to  the  citizens 
in  taking  this  step  are  so  patent  and  unquestion- 
able, that,  when  a  municipal  plant  has  once  been 
installed,  they  become  restless  under  private  com- 
mercial lighting. 

That  municipal  rates  are  much  lower  than  private 
rates  is  beyond  question.  (See  Table  XXXVI.) 
Francisco  cannot  disprove  it,  either  by  screwing 
the  figures  or  inflating  depreciation.  He  there- 
fore complains  that  the  taxpayers  are  being  op- 
pressed for  the  benefit  of  the  consumers  ;  and 
Foster  gives  a  table  showing  that,  where  the  city 
does  commercial  lighting,  the  net  cost  to  the  city 
for  its  street-lights  is  greater  than  where  it  does 
street^lighting  alone,  which  is  explained,  he  says, 
by  the  extremely  low  prices  for  commercial  work. 


MUNICIPAL   ELECTRIC  LIGHTING. 


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124  MUNICIPAL   MONOPOLIES. 

The  table  is  reproduced  on  a  later  page  (Table 
XXX.). 

I  will  show  below  how  this  table  is  compiled, 
and  of  how  little  value  it  is.  Suffice  it  here  to 
say,  that  the  cities  doing  commercial  lighting  very 
generally  report  that  their  street-lights  cost  them, 
net,  much  less  on  account  of  the  commercial  profits 
than  they  did  without  the  latter. 

In  the  operation  of  a  commercial  plant,  it  is  a 
question  of  policy  whether  the  city  shall  make  a 
profit,  and  so  reduce  the  cost  of  street-lighting  to 
the  taxpayers,  thus  taxing  consumers  for  the  ben- 
efit of  taxpayers,  or  shall  furnish  the  light  to  con- 
sumers below  cost,  thus  taxing  the  taxpayers  for 
the  benefit  of  consumers.  I  assume  that  the  near- 
est approach  to  justice  is  attained  when  each  ser- 
vice pays  its  own  way.  Consumers  should  pay 
for  what  they  get  at  its  net  cost  price,  and  tax- 
payers should  pay  for  street-lamps  at  their  cost. 
If  this  principle  be  adopted,  depreciation  should  be 
charged  under  the  operating  expenses  of  the  plant, 
and  should  be  actually  written  off  from  the  capital 
from  year  to  year ;  the  taxable  property  of  the  city 
should  be  assessed  a  fixed  rate  per  lamp  for  all 
street-lamps,  the  proceeds  of  which  should  be  deb- 
ited by  the  electrical  administration  as  regular  in- 
come along  with  the  commercial  income ;  and  from 
the  two  together  should  be  deducted  operating  ex- 
penses, leaving  a  "  profit  and  loss  "  or  "  net  rev- 


MUNICIPAL   ELECTRIC  LIGHTING.         125 

enue  "  account,  which,  in  turn,  should  be  credited 
with  interest  on  bonds,  depreciation,  and  sinking- 
fund.  But  the  matter  of  depreciation  in  a  public 
plant  is  so  closely  connected  with  the  sinking-fund, 
that,  in  order  to  reach  final  conclusions  concerning 
it,  we  shall  first  consider  the  latter. 

SINKING-FUND   AND   DEPRECIATION-FUND. 

I  have  already  indicated,  that,  in  the  manage- 
ment of  a  private  electrical  company,  the  different 
funds  known  as  "depreciation,"  "insurance,"  "re- 
serve," "profit  and  loss,"  are  identical  in  principle, 
and  are,  in  effect,  merely  subdivisions  of  a  "  sur- 
plus "  or  "reserve."  This  surplus  has  been  re- 
tained by  the  company  rather  than  distributed 
among  the  stockholders,  not  primarily  for  indus- 
trial purposes,  but  for  commercial  purposes,  as 
giving  greater  command  over  competitors,  and  pro- 
tecting against  panics  and  depressions.  I  have 
also  shown  that  such  a  fund  is  not  only  not 
needed,  but  is  a  detriment  in  a  municipal  street- 
plant,  where  the  taxpayers  prefer  to  invest  their 
money  individually  in  their  own  way ;  but  that  in 
a  municipal  commercial  plant,  which  we  are  now 
considering,  where  charges  must  be  fixed  at  such 
a  rate  as  will  distribute  the  cost  of  street-lighting 
and  commercial  lighting  fairly  between  taxpayers 
and  consumers,  a  charge  for  depreciation  should 


126  MUNICIPAL  MONOPOLIES. 

be  calculated,  and  upon  it  should  be  based  the 
charges,  at  cost  of  production  thus  obtained,  for 
street-lamps  and  for  commercial  lamps. 

But  there  is  a  further  distinction  to  be  made 
between  public  and  private  financiering.  The 
bonded  debt  incurred  by  a  private  company  is 
looked  upon  as  an  investment  and  not  a  burden ; 
it  is  never  to  be  paid  off ;  it  represents  the  cash 
actually  invested,  while  the  stock  stands  merely 
for  the  speculative  and  managing  interest  in  the 
enterprise.  The  advantages  of  a  permanent  debt 
consist  in  the  fact  that  it  creates  a  fixed  charge 
upon  the  business,  which  is  used  as  an  appeal  to 
the  public  and  the  courts  against  lowering  the 
charges  by  legislation.  It  is  a  first  claim  upon 
the  revenues,  and  has  a  superior  sanctity  over  the 
stock,  which  is  always  looked  upon  as  speculative 
and  problematical.  Consequently  all  expenses  that 
can  possibly  be  so  treated  are  transmuted  from 
stocks  into  bonds,  and  these  are  perhaps  distrib- 
uted among  the  stockholders. 

On  the  other  hand,  in  a  public  industry  a  debt 
is  a  burden  to  be  liquidated  as  soon  as  possible ;  it 
detracts  just  so  much  from  the  complete  ownership 
of  the  people.  It  creates  an  idle  class,  living  on 
fixed  and  guaranteed  incomes.  By  paying  the 
debt  the  interest  is  distributed  among  the  people 
in  lower  taxes  and  lower  charges,  instead  of  re- 
maining a  permanent  claim  to  prohibit  a  lessening 


MUNICIPAL   ELECTRIC  LIGHTING.         127 

of  these  burdens.  As  a  city  can  borrow  money  at 
a  rate  1  to  2  per  cent  less  than  that  paid  by  a 
private  company,  it  can  afford,  without  additional 
burden  to  the  people,  to  devote  the  per  centum 
thus  economized  to  a  sinking-fund.  A  2-per-cent 
sinking-fund  invested  at  4  per  cent  will  wipe  out 
the  principal  in  twenty-eight  years.  Such  an  in- 
vestment takes  the  place  of  funds  invested  by  a 
private  company  against  emergencies  for  deprecia- 
tion, insurance,  and  reserve.  All  these  emergen- 
cies, in  a  municipal  plant,  can  be  cared  for  at  the 
time  when  they  occur,  as  we  have  already  seen, 
and  especially  so  if  the  accumulation  of  a  sinking- 
fund  is  in  progress,  whereby  interest  payments 
are  being  each  year  lessened.  The  saving  in  in- 
terest thus  effected  each  year  is  itself  a  deprecia- 
tion-fund, not  indeed  set  aside,  but  retained  in  the 
pockets  of  the  people,  and  ready  to  be  yielded  up 
on  emergency. 

Allowing,  therefore,  that -the  actual  depreciation 
of  an  electrical  plant  above  current  repairs  and 
maintenance  is  3  per  cent  annually,  it  follows  that, 
where  a  city  is  accumulating  a  sinking-fund,  or  is 
paying  its  debt  to  this  amount  annually,  no  addi- 
tional provision  is  required  for  a  depreciation-fund. 
The  charges  for  public  and  private  lights  should 
be  fixed  at  a  price  which  will  cover  operating 
expenses,  interest  on  debt,  and  a  sinking-fund  of 
this  amount.     When  ultimately  the  debt  is  paid, 


128  MUNICIPAL  MONOPOLIES. 

and  the  sinking-fund  is  discontinued,  then  a  depre- 
ciation-fund should  be  established,  in  order  to  keep 
up  the  annual  charge  of  3  per  cent  on  the  capital 
invested.  This  fund  should  not  necessarily  be  in- 
vested in  bonds,  but  should  constitute  a  "  new 
construction  "  fund,  to  be  credited  with  such  new 
construction  as  is  ordinarily  executed  without  the 
issue  of  bonds.  New  construction  to  the  amount 
of  3  per  cent  annually  would  offset  the  deprecia- 
tion, and  would  maintain  intact  the  capital  value 
of  the  plant ;  and  it  should  therefore  be  met  out  of 
the  revenues  of  the  enterprise,  rather  than  out  of 
taxes  or  bonds. 

The  cities  of  Massachusetts  are  required  by  law, 
when  establishing  a  municipal  plant,  to  limit  the 
term  of  bonds  to  thirty  years,  and  to  provide  a 
sinking-fund  to  cancel  the  bonds  at  maturity;  or, 
in  lieu  of  bonds,  they  may  issue  scrip  payable  in 
annual  installments.  In  either  case  these  cities 
are  now  paying  their  indebtedness  in  installments 
running  as  high  as  7  per  cent  annually.  (Hull 
pays  $3,000  on  bonds  and  $3,333  for  sinking-fund 
on  a  capital  expenditure  of  $90,000.)  Through- 
out the  other  States  of  the  Union  it  is  now  quite 
generally  accepted  by  smaller  cities  that  bonds  of 
this  kind  should  be  canceled  in  about  thirty  years. 
Batavia,  N.Y.,  pays  one-sixth  of  its  electric-lighting 
debt  each  year.  In  all  such  cases  a  depreciation 
fund  would  be  an  absurdity. 


MUNICIPAL   ELECTRIC  LIGHTING. 


129 


It  is  to  be  noted,  however,  that  in  American 
cities  the  sinking-fund  and  debt  payments  are 
usually  met  directly  from  taxes,  and  not  from 
charges  to  consumers.  This  is  in  harmony  with 
the  principle  that  charges  for  services  should  be 
as  low  as  possible  in  order  to  extend  the  use  of 
electricity.  The  same  principle  is  the  dominant 
one  in  municipal  water-works.  It  differs  materially 
from  the  policy  of  the  conservative  cities  of  Great 
Britain,  which  maintain  their  charges  high  enough 
to  cover  not  only  a  sinking-fund  and  a  depreciation- 
fund,  but  also  to  insure  a  profit  for  the  taxpayers. 
The  following  table  shows  for  typical  cities  the 
per  centum  on  the  capital  investment  which  was 
set  aside  in  1897  for  depreciation  and  sinking  funds, 
and  the  total  per  centum  of  both  these  funds. 


TABLE    XXVI.       Annual    Contributions,   Depreciation,  Re- 
serve, and  Sinking  Funds.  —  Per  Cent. 


Depreciation. 

Reserve. 

Slneino. 

Total. 

Bradford     .... 

2.0 

3.3 

5.3 

Dublin 

3.9 

3.9 

Edinburgh  .... 

1.7 

2.0 

3.7 

Glasgow      .... 

4.8 

1.0 

5.8 

Manchester      .     .     . 

1.1 

2.6 

2.3 

6.0 

These  and  other  British  cities  carry  large  reserve 
and  depreciation  funds  which  are  usually  reinvested 
in  extensions  and  new  construction,  or  may  be  held 
temporarily  in  the  form  of  securities.  Such  funds 
are,  therefore,  merely  a  book-keeping  device  for  pay- 


130  MUNICIPAL  MONOPOLIES. 

ing  for  new  construction  by  means  of  high  charges 
to  consumers  and  high  profit,  rather  than  by  means 
of  bonds  and  taxes.  Table  XXVII.  shows  for  these 
cities  the  enormous  profit  earned  from  commer- 
cial electric  lighting.  Manchester  clears  $140,625 
above  operating  expenses  and  interest,  amounting 
to  55  per  cent  of  the  gross  receipts.  This  profit 
is  transferred  to  depreciation  and  reserve  funds 
amounting  to  $56,360,  which  is  reinvested  in  ex- 
tensions of  the  plant,  to  a  sinking-fund  for  liqui- 
dation of  the  debt ;  and  the  balance,  $48,500, 
is  devoted  to  the  relief  of  taxes.  In  other  cities 
having  public  lights,  the  city  has  a  profit,  as  high 
as  $42,000  in  Glasgow,  above  the  cost  of  public 
lighting. 

It  appears  from  these  facts  that  British  cities, 
while  ostensibly  caring  for  depreciation,  are  really 
compelling  consumers  to  pay  for  the  plants  and 
contribute  to  the  taxes.  The  policy  is  one  of 
indirect  taxation.  The  depreciation-funds  are  but 
an  incident  in  this  larger  policy  of  taxing  con- 
sumers for  the  benefit  of  taxpayers.  This  is  per- 
haps not  a  burden  on  consumers,  for,  as  will  appear 
later,  the  charges  made  by  municipal  plants  in 
Great  Britain  are  somewhat  lower  than  those  im- 
posed by  private  companies ;  but  the  policy  is  one 
which  would  probably  not  be  tolerated  in  Ameri- 
can cities.  Here  the  principle  of  the  widest  ex- 
tension of  use  among  the  people,  and  the  lowering 


MUNICIPAL    ELECTRIC  LIGHTING. 


131 


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132  MUNICIPAL   MONOPOLIES. 

of  charges  for  the  benefit  of  consumers,  has  a 
stronger  hold  than  in  Europe ;  and  popular  suffrage 
brings  such  pressure  on  public  authorities  that 
charges  are  usually  lowered  as  often  as  the  rev- 
enues will  warrant.  This  American  policy  is  in 
harmony  with  the  principle  already  laid  down  on 
preceding  pages,  that,  where  a  sinking-fund  or  an 
annual  debt  payment  equal  to  3  per  cent  of  the 
capital  is  in  operation,  no  further  provision  is 
needed  for  depreciation.  The  actual  wear  and 
tear  being  included  in  operating  expenses,  and 
depreciation  by  replacements  amounting  to  but 
3  per  cent  of  the  total  investment,  a  sinking-fund 
fully  meets  this  estimated  deduction  from  the  cap- 
ital value  of  the  plant.  And  when  the  debt  is 
paid  a  "depreciation-fund"  or  "new-construction" 
fund  of  3  per  cent  can  then  be  created  in  order 
to  maintain  intact  the  capital  value.  The  provis- 
ion for  a  sinking-fund  applies  to  both  street-plants 
and  commercial  plants,  and  the  charges  for  com- 
mercial lighting  should  be  so  placed  as  to  secure 
it ;  but  the  provision  for  a  depreciation-fund  ap- 
plies only  to  commercial  plants,  since,  as  already 
shown,  depreciation  in  a  street-plant  is  met  by  tax- 
payers only  when  replacement  actually  occurs,  but 
in  a  commercial  plant  the  consumer's  should  also 
contribute  to  these  replacements.  This  is  done 
by  placing  the  charges  high  enough  to  provide  for 
a  depreciation-fund. 


MUNICIPAL   ELECTRIC  LIGHTING.  133 

The  foregoing  observations  turn  upon  the  dis- 
tinction between  "  depreciation  "  and  "  deprecia- 
tion-fund." Depreciation  is  a  constant  factor,  as 
already  shown,  and  should  be  taken  into  account 
in  comparing  the  cost  of  public  with  that  of  private 
lighting.  Depreciation-fund  is  merely  a  device 
pertaining  to  the  wider  policies  of  cities  in  regu- 
lating the  charges  for  electrical  supply,  and  may 
or  may  not  be  adopted,  depending  upon  the  policy 
which  the  citizens  choose  to  follow  in  balancing 
the  claims  of  taxpayers  and  consumers. 

THE    CORRECTED    RESULTS   OF   PREVIOUS 
INVESTIGATIONS. 

Having  now  considered  at  length  taxes,  insur- 
ance, depreciation,  and  sinking-fund,  we  are  ready 
to  proceed  with  a  comparison  of  the  cost  of  public 
with  private  lighting.  We  see  at  once  how  greatly 
exaggerated  are  Foster's  estimates.  He  indeed 
does  not  make  computations  for  lost  taxes ;  but 
since  this  item  cannot  exceed  1  per  cent,  and  prob- 
ably should  be  excluded  altogether,  and  since  in- 
surance is  included  in  operating  expenses  of  all  the 
small  plants  which  he  examined,  his  rate  of  7^  per 
cent  for  depreciation  is  fully  double  a  reasonable 
rate.  Parsons,  who  makes  fixed  charges  5  per  cent 
to  cover  depreciation,  insurance,  and  lost  taxes, 
is  certainly  sufficiently  liberal  to  the  opponents  of 


134  MUNICIPAL   MONOPOLIES. 

municipal  ownership  ;  and  indeed,  as  we  have  seen, 
insurance  and  taxes  are  not  fairly  to  be  added  to 
the  costs  in  municipal  plants,  leaving  3  per  cent 
as  adequate  for  depreciation. 

The  exaggerations  of  Foster's  estimates  appear 
yet  more  clearly  when  he  compares  directly  the 
costs  under  public  ownership  with  the  costs  under 
private  ownership.  He  compares  the  total  cost 
per  lamp-hour  of  the  fourteen  cities  of  his  investi- 
gation which  had  street-lighting  plants  alone,  with 
fourteen  other  cities  having  private  plants  (Table 
XXVIII.).  His  averages  apparently  show  that  in 
municipal  plants  the  cost  to  the  city  is  1.86  cents 
higher  per  hour  than  in  the  private  plants. 

This  table  is  worthless,  both  in  method  and  in 
fact.  (1 .)  Every  statistician  knows  that  in  getting 
averages  extreme  and  exceptional  cases  should  be 
omitted.  In  these  fourteen  municipal  plants,  there 
are  three  exceptional  cases,  —  Alameda,  Cal.,  where 
he  himself  says  the  high  cost  "  throws  doubt  on 
the  accuracy  of  the  figures;"  Fairfield,  la.,  a  di- 
minutive plant,  with  but  fourteen  arcs  and  no 
commercial  lighting ;  and  Anderson,  Ind.,  a  plant 
using  natural  gas.  Two  of  these  cities  have  ex- 
ceptionally high  costs,  and  one-has  exceptionally 
low  costs.  Excluding  them,  the  average  would  be 
4.13  instead  of  4.44  cents  per  lamp-hour.  (2.)  His 
rate  of  interest  for  municipal  plants  is  6  per 
cent,  which  is  50  per  cent  above  the  correct  rate. 


MUNICIPAL   ELECTRIC  LIGHTING. 


135 


TABLE  XXVIII.       Comparative  Cost  of   Street  Arc   Lamps 
to  the  Taxpayers. — Foster.1 


Cities 

Cost  ter  Lamp-Hour. 

Total  Cost  for  the 
Output,  City  Plants. 

Total  Cost  by  Contract 

with  Private  Plants. 

Names  of  Cities  not 

Given. 

Fairfield,  Iowa     .... 

Little  Rock,  Ark.     .     .     . 

Marshalltown,  la.    .     .     . 

• 

Elgin,  111 

West  Troy,  N.V.      .     .     . 
Bay  City,  Midi 

$.0480 

.0257 

.0413 

.0394 

.0705  * 

.0150* 

.0503 

.0226 

.1240* 

.0395 

.0430 

.0400 

.0241 

.0308 

$.055 
.052 
.026 
.055 
.033 
.025 
.032 
.033 
.029 
.035 
.032 
.028 
.033 
.033 

.0444 

.0358 

(3.)  This  rate  is  computed  upon  the  total  cost  of 
plant  to  date,  including  new  construction  paid  out 
of  taxes.  It  should  be  computed  only  on  the  out- 
standing debt.  (4.)  His  rate  of  depreciation  is  7£ 
per  cent,  which  is  more  than  100  per  cent  above  the 
true  rate.  (5.)  He  selects  fourteen  private  plants 
for  comparison,  which  he  says  are  similarly  situated 
(giving  no  names).  But  this  is  impossible;  for 
private  plants  have  always  commercial  lighting  as 
well  as  public  lighting,  and  they  usually  give  a 

1  These  columns  are  reproduced  later  in  Table  XXIX.  for 
comparison  and  correction. 


136  MUNICIPAL   MONOPOLIES. 

lower  rate  to  the  city  than  to  private  consumers, 
as  will  he  shown  on  a  later  page.  They  can  well 
afford  to  do  so,  for  thus  they  keep  their  hold  on 
the  private  citizens.  The  usual  method  of  judging 
the  companies  by  their  rates  to  the  city  overlooks 
the  way  in  which  the}r  are  depriving  the  people  at 
large  of  the  advantages  of  electricity.  (6.)  In  Ta- 
ble XXX.  Mr.  Foster  selects  a  different  group  of 
sixteen  private  plants,  the  average  cost  of  whose 
lights  to  the  cities  is  1.086  per  kw.-hour  ($.041  per 
lamp-hour),  instead  of  $.0358  per  lamp-hour. 

Taking  the  first,  second,  and  four-th  of  these 
criticisms  into  account,  and  omitting  the  others,  I 
have  drawn  up  the  following  table,  using  the  data 
supplied  by  Foster  himself  ;  and  by  the  side  of  the 
estimates  which  he  has  made  for  the  fourteen  city 
plants  in  question,  I  have  placed  three  trial  columns 
showing  what  would  be  the  cost  per  lamp-hour: 
first,  with  interest  at  4  per  cent  (the  actual  rate), 
and  depreciation  at  lh  per  cent  (his  rate);  sec- 
ondly, with  interest  at  4  per  cent,  and  depreciation 
at  5  per  cent ;  thirdly,  with  interest  at  4  per  cent, 
and  depreciation  at  3  per  cent.  Interest  in  all 
cases  is  computed  on  the  total  cost  of  construction, 
and  not  on  bonded  debt.  I  have  also  estimated 
again  for  each  of  the  four  columns  what  would  be 
the  true  averages  if  the  three  exceptional  cases 
were  omitted.  It  will  be  seen  that,  even  with 
depreciation  at  7|  per  cent,  as  he  claims  it  should 


MUNICIPAL   ELECTRIC  LIGHTING. 


137 


be,  the  average  cost  to  cities  is  only  $.0351  when 
exceptions  are  omitted,  and  interest  is  put  at  its 


TABLE    XXIX.       Comparative    Costs   at  Different  Kates  of 
Interest  and  Depreciation  per  Lamp-Hour. 


1 

2 

3 

4 

5 

6 

7 

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Cities. 

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$ 

$ 

$ 

$ 

$ 

0.0480 

0.0459 

0.0426 

0.0403 

0.055 

.0246 

.0231 

.0216 

.052 

Easton,  Perm. . 

4 

.0413(4%) 

.0413 

.0388 

.0359 

.026 

Frederick,  Md. 

.0319 

.0372 

.0345 

.0323 

.055 

Fairfield,  la.*  . 

.0765 

.0712 

.0648 

.0597 

.053 

Anderson,  Ind.1 

.0150 

.0141 

.0127 

.0120 

.025 

Little  Rock,  Ark 

.0503 

.0448 

.0413 

.0385 

.032 

Marshalltown,  la 

.0226 

.0207 

.0183 

.0162 

.033 

Alameda,  Cal.1 

5 

.1240 

.1229 

.1145 

.1004 

.029 

Painesville,  0. 

.0395 

.0392 

.0366 

.0347 

.035 

,0430 

.0410 

.0371 

.0337 

.032 

Elgin,  111.    .     . 

5 

.0400 

.0391 

.0372 

.0348 

.028 

West  Troy,  N.Y. 

.0241 

.0225 

.0212 

.0199 

.033 

.0300 

.0279 

.0262 

.033 

Averages     .     . 

.0444 

.0425 

.0393 

.0361 

.0358 

Extremes  omittec 

I 

.0413 

.0351 

.0326 

.0304 

C.  P.  per  1  cent 

484 

570 

613 

658 

559 

1  These  are  omitted  under  "  extremes  omitted." 

true  rate  of  4  per  cent.  By  the  other  estimates  it 
is  much  lower.  Thus,  while  Mr.  Foster  has  been 
candid,  a  correction  of  his  guesses  and  mistakes 


i;;s 


MUNICIPAL  MONOPOLIES. 


of   method   demonstrates  with  his  own  data  the 
decided  superiority  of  the  municipal  plants. 

TABLE  XXX.        Net  Cost  of  Public  Lighting  Per  KW,  to 
Cities  Having  Commercial  Plant.  —  Foster. 


Net  Cost  teb 

Cost  pee  kw. 

KW.  USED  BY 

Cost  to  Cities 

ClTT. 

Fob  Total 

City  after  Deduct- 

By Private 

Output. 

ing  Commercial 

Companies. 

Lighting. 

Santa  Cruz,  Cal., 

$0.2473 

§0.2620 

$0,115 

Portland,  Ore., 

.0960 

.0913 

.077 

S.  Norwalk,  Conn., 

.0528 

.0019 

.081 

Frederick,  Md., 

.0569 

.0565 

.053 

Metropolis,  111., 

.1324 

.1770 

.091 

Council  Grove,  Kan. 

.0884 

.0259 

.082 

Arlington,  Minn., 

.0975 

.0149 

.046 

Crawfordsville,  Ind. 

.0758 

.0830 

.078 

St.  Clairsville,  0., 

.1540 

.2160 

.104 

Little  Rock,  Ark., 

.0561 

.0011 

.041 

High  Point,  N.C., 

.1470 

.1760 

.065 

Marshalltown,  la., 

.0483 

.0617 

.080 

Alameda,  Cal., 

.0565    „ 

.0734 

.123 

Ashtabula,  0., 

.1095 

.1870 

.162 

Blue  Island,  111., 

.0956 

.1294 

.095 

Averages    .... 

$0.1009 

$0.1105 

$0,086 

Same  in  lamp-hours, 

2,000c.p.480watts, 

.0484 

.0579 

.041 

Total  cost  per  lamp- 

hour,  2,000  c  p. ,  for 

street-plants  alone. 

(Table  XXYIII). 

.0444 

Besides  Table  XXVIII.,  in  which  Foster  com- 
pares the  cost  of  private  lighting  with  that  of 
fourteen  cities  having  street-lighting  plants  alone, 
without  commercial  lighting,  he  gives  also  another 
table,  here  reproduced  (Table  XXX.),  for  fifteen 


MUNICIPAL   ELECTRIC  LIGHTING.  139 

municipal  plants  having  both  street-lighting  and 
commercial  lighting.  By  this  table  he  shows  that, 
after  deducting  the  revenue  derived  from  the  com- 
mercial plant,  the  public  lights  cost  the  cities  more 
than  where  no  commercial  lighting  is  done.  The 
averages  show  that  the  cost  for  the  total  output  is 
10.09  cents  per  kw.,  while  the  cost  for  city  lighting, 
after  deducting  commercial  income,  is  11.05  cents 
per  kw.  Reduced  to  the  cost  of  city  lighting  per 
lamp-hour  of  2,000  c.  p.  arcs,  the  figures  are  respec- 
tively 4.84  cents  without,  and  5.79  cents  with, 
commercial  lighting,  compared  with  4.1  cents 
charged  by  private  companies. 

When,  however,  this  table  is  corrected  accord- 
ing to  the  rules  given  above  (see  Table  XXIX. 
and  page  134),  we  find  that  in  cities  with  com- 
mercial plants  the  net  cost  of  public  lighting, 
instead  of  being  8.1105  per  kw.-hour  (8.0579  per 
lamp-hour),  is  only  8.0668  per-kw.  hour  (8.0319 
per  lamp-hour),  and  is  therefore  less  than  when 
the  city  has  street-lamps  alone,  and  is  less  than  the 
price  paid  to  the  private  companies,  which  Foster 
adduces,  by  8.0192  per  kw.-hour  (f.0091  per  lamp- 
hour),  a  difference  of  22  per  cent  in  favor  of  the 
municipal  plants.  The  table  is  reproduced  here 
with  these  corrections  (Table  XXXI.). 

The  foregoing  analysis  of  Foster's  statistics  is 
enough  to  show  that  the  actual  results  of  munici- 
pal lighting  are  superior  to  those  of  private  opera- 


140 


M  UNI  CIPA  L   M  ON  OP  OLIES. 


7 

Total  Cost 

by  contract 

with  private 

companies,  names 

not  given. 

Foster. 

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Luverne,  Minn.       .     .     . 
Dunkirk,  N.Y 

Arlington,  Minn.    .     .     . 
Falls  City,  Neb.      .     .     . 

St.  Clairsville,  0.    .     .     . 

Hannibal,  Mo 

Quakertown,  Pa.     .     .     . 
Westfield,  N.Y. 

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MUNICIPAL   ELECTRIC  LIGHTING.  141 

tion.  The  estimates,  therefore,  made  in  the  last 
three  columns  of  Table  II.  may  be  considered  as 
marking  the  extreme  cost  of  municipal  lighting, 
including,  as  they  do,  every  reasonable  charge, 
and  allowing  from  2  to  4  per  cent  more  for  fixed 
charges  than  the  facts  really  demand. 

In  addition  to  the  foregoing  criticisms  and  discussion 
of  statistical  methods,  the  following  items  concerning  the 
municipal  plants  of  Allegheny  and  Detroit  are  given.  The 
superintendent  of  public  lighting  in  Allegheny  reports  that 
the  operating  expenses  for  1,037  arc  lamps  in  1896-1897  were 
$53.55  per  lamp,  having  been  $61.24  in  1895-1896.  There 
were  also  3,400  incandescents  ;  and  on  the  basis  of  the  total 
output  in  kw.-hours,  these  made  a  total  equivalent  of  1,235- 
2,000  candle-power  arcs.  The  operating  expenses  were 
$73,851.98.  There  was  no  debt,  and  depreciation  at  3  per 
cent  makes  the  cost  of  each  arc  equivalent  to  $62.03  per 
year. 

The  municipal  plant  in  Detroit  for  the  year  ending 
June  3,  1897,  is  reported  by  the  commissioners  as  furnish- 
ing 1,564  arc  lamps,  including  interest,  depreciation,  and 
lost  taxes,  at  a  cost  of  $89.42  each  per  year.  There  were 
also  3,064  incandescents  in  public  buildings,  which,  on  the 
basis  of  the  output  in  kilowatts,  bring  the  total  full  arc 
equivalents  to  1,716.  The  total  cost,  computed  according  to 
the  principles  laid  down  in  this  chapter,  was  $77.91,  instead 
of  S89.42.  The  high  original  cost  of  the  plant  ($714,- 
843.76),  equal  to  $416.57  per  arc  equivalent,  is  $134.07  in 
excess  of  the  cost  of  the  Allegheny  plant  ($282.50  per  arc 
equivalent),  and  probably  $200  in  excess  of  the  cost  in 
private  plants  which  have  commercial  lighting.  This  brings 
the  estimate  for  interest  and  depreciation  to  a  figure  much 


142  MUNICIPAL   MONOPOLIES. 

higher  than  in  other  plants  when  computed  on  the  total 
cost.  The  high  cost  includes  underground  construction  and 
provision  for  large  extensions  in  the  future,  when  perhaps 
a  commercial  equipment  will  be  installed.  The  actual 
cash  cost  of  the  lamps  is  a  better  basis  of  comparison. 
This  was  $G4.18  in  1897,  a  decrease  of  $4.33  below  the  cost 
of  the  first  year  of  operation  ($08.52).  Table  XXXII. 
furnishes  a  comparison  of  certain  street-plants  which  have 
been  especially  referred  to  in  this  chapter,  with  the  charges 
paid  to  private  companies  by  certain  of  the  larger  cities 
which  come  more  nearly  in  the  class  with  Allegheny  and 
Detroit. 

COMMERCIAL   LIGHTING. 

The  foregoing  comparisons  have  dealt  mainly 
with  American  street-plants.  But  it  is  an  unfair 
comparison  which  looks  mainly  at  street-lighting. 
Even  more  important  is  the  relief  of  the  pri- 
vate consumers  from  exorbitant  charges.  The  full 
significance  of  public  ownership  does  not  appear 
when  we  compare  the  prices  charged  by  private 
companies  for  street-lighting  with  the  cost  of  the 
same  where  the  city  owns  its  own  street-plant 
without  commercial  attachment.  The  commercial 
lighting  in  large  cities  is  more  valuable  than  the 
public  lighting,  and  companies  usually  give  to  the 
city  better  terms  and  lower  rates  than  to  the  citi- 
zens for  the  same  or  equivalent  service.  The 
lower  charge  is  in  effect  a  franchise  tax  which  is 
paid  indirectly  by  the  commercial  customers  of  the 
electric  company.     The  only  failures  of  municipal 


MUNICIPAL    ELECTRIC  LIGHTING. 


143 


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144  MUNICIPAL  MONOPOLIES. 

plants  hitherto  reported  are  those  which  furnished 
street-lighting  alone,  and  the  so-called  greater  suc- 
cess of  the  private  companies  which  took  the  place 
of  the  municipal  failures  has  been  based  on  their 
commercial  business.  This  will  appear  more 
clearly  from  Table  XXXIII.,  where  I  have  com- 
piled, from  the  Report  of  the  Massachusetts  Board 
of  Gas  and  Electric  Light  Commissioners,  the  com- 
parative prices  charged  by  all  private  companies 
for  public  and  commercial  arc  lamps, in  the  fifteen 
cities  in  that  State  for  which  complete  reports  are 
given.  It  appears,  after  making  corrections  in 
seven  cases  in  order  to  bring  all  lamps  to  the  all- 
night  schedule  for  2,000  c.  p.  lamps,  that  there  are 
eleven  of  the  fifteen  cities  in  which  commercial 
charges  are  4  per  cent  to  107  per  cent  above  pub- 
lic charges  for  the  same  or  equivalent  service,  there 
are  two  cities  in  which  charges  are  less,  and  two 
in  which  they  are  the  same.  Wiring  and  renewals, 
too,  are  generally  charged  extra  to  the  commercial 
customers,  but  are  always  included  in  the  price  to 
the  cities. 

Arc  lighting  is  a  relatively  small  part  of  com- 
mercial service.  The  saving  to  consumers  and  prof- 
its to  taxpayers  come  mainly  from  incandescent 
lighting.  Incandescent  lighting  can  be  furnished 
at  ten  cents  per  kw.-hour,  or  £  cent  per  lamp-hour  of 
16  c.  p.,  —  one-half  the  usual  private  rates,  — and 
yield  a  large  profit  to  the  municipal  plant.     At 


MUNICIPAL   ELECTRIC  LIGHTING. 


145 


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146  MUNICIPAL  MONOPOLIES. 

this  rate  it  is  cheaper  than  gas,  and  more  whole- 
some and  convenient. 

The  city  of  Jamestown,  N.Y.,  added  its  commercial 
plant  after  the  street-plant  had  been  operating  a  couple  of 
years ;  and  one  large  consumer,  who  had  been  paying 
$1,400  a  year  for  lighting,  now  gets  his  light  from  the  city 
for  $900.  A  prominent  social  club  had  been  paying  $450 
yearly  for  lighting  its  rooms.  In  order  to  retain  its  custom, 
the  private  company  has  reduced  the  charge  for  the  same 
light  to  $120  a  year.  The  city  operates  275  street-lamps  of 
1,200  candle-power  each  an  average  of  six  hours  per  night, 
or  2,200  per  year,  and  1,200  sixteen  candle-power  incandes- 
cents  in  alleys  and  public  buildings.  The  latter,  at  three 
hours  per  night,  are  equivalent  to  100  arcs,  making  a  total 
of  375-1,200  candle-power  arcs.  The  operating  expenses 
and  insurance  are  $19,122.16 ;  interest  on  bonds  ($72,000  at 
4  per  cent),  $2,880  ;  depreciation  on  cost  of  plant  ($74,000 
at  3  per  cent),  $2,220  ;  total  cost,  $23,967.16.  The  com- 
mercial income  from  1,500  lamps  is  $5,913.89,  leaving 
a  net  cost  to  taxpayers  for  public  lamps  of  $18,053.27, 
or  $48.14  per  year,  or  $.0219  per  lamp-hour.  Comparing 
Jamestown  with  the  only  other  cities  of  New  York  having 
more  than  100  lamps  of  1,200  candle-power  furnished  by 
contract  with  private  companies,  we  have  the  accompany- 
ing table  (Table  XXXIV.).  It  shows  that,  without  making 
correction  for  schedule,  the  candle-power  for  one  cent  in 
Jamestown  considerably  exceeds  each  of  the  others,  while 
with  the  correction  the  excess  is  50  to  150  per  cent.  The 
saving  to  the  city  is  fully  one  cent  per  lamp-hour,  or 
$22  per  year  for  each  lamp  equivalent,  or  $8,250  ■  for  375 
lamps.  Besides  this,  the  commercial  customers  of  the  city 
pay  $6,000  per  year,  which  is  a  saving  of  $3,000  for  them 
as   compared  with  their  former  payments  to   the   private 


MUNICIPAL   ELECTRIC  LIGHTING. 


147 


company.  Further,  the  private  company  still  furnishes 
10,000  incandescents,  188  arcs,  and  200  horse-power,  on 
which  the  reductions  in  charges  have  been  fully  $10,000. 
The  total  saving  to  the  city,  therefore,  has  been  probably 
$20,000  yearly. 

TABLE  XXXIV. 


H 

M 

Cities. 

No.  OF 
Lamps. 

Schedule. 

Hours 

PER 

Year. 

Cost  per 
Lamp 

PElt 

Year. 

p 

0 

a 

S 
< 
►J 

Pn 

H 
O 

o 

Ph  O 
si  h 

u*1 

$ 

$ 

Jamestown  .     . 
Jamestown  .     . 

375  |  Moonlight, 

2,200 

48.14 

.0219 

549 

Corrected     to     Al 

-night 

Amsterdam .     . 

Sc 

liedule   .     . 

60.17 
98.00 

.0146 
.0250 

712 

480 

138 

All-night, 

4,000 

Brooklyn      .     . 

3,382 

All-night, 

4,000 

124.10 

.0310 

387 

Elniira     .     .     . 

240 

All-night, 

4,000 

102.20 

.0260 

470 

New  Brighton . 

100 

All-night, 

4,000 

100.00 
( 146.00 

.0250 

.o:vro 

480 
328 

New  York  City, 

3,643 

All-night, 

4,000 

{  164.20 
( 182.50 

.0410 
.0450 

300 
263 

N.  Tonawanda, 

163 

All-night, 

4,000 

90.00 

.023 

534 

Lansing,  Mich.,  bought  out  the  private  plant,  and  re- 
duced rates  at  once  from  twenty  cents  per  kw.  to  eighteen 
cents,  and  again  to  twelve  cents,  in  two  years.  The  city 
pays  its  municipal  plant  $  10,000  yearly  for  117  2,000  candle- 
power  lamps,  moonlight  schedule,  and  the  plant  receives 
also  $15,000  for  private  lighting,  making  a  profit  for  the 
plant  of  $7,000  yearly  above  operating  expenses  and  inter- 
est. The  rates  are  twelve  cents  per  kw.,  being  a  reduction 
of  eight  cents  below  the  rates  charged  by  the  private  com- 
pany whose  plant  the  city  purchased.  The  saving  to  the 
citizens  on  commercial  lighting  is  therefore  approximately 
$10,000  per  year. 


148 


M  U  NIC  IP  A  L   MO  NOP  OLIES. 


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MUNICIPAL    ELECTRIC  LIGHTING. 


149 


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150  MUNICIPAL  MONOPOLIES. 

Logansport,  Ind.,  establislied  a  municipal  plant  in  1894 
at  a  cost  of  $90,000.  The  expenditures  in  1897  were 
$18,946.75,  of  which  $13,206.60  were  for  operation,  and 
$5,740.15  for  new  construction.  The  commercial  receipts 
were  $17,442.53,  or  $4,235.93  in  excess  of  operating  ex- 
penses, and  within  $1,504.22  of  the  total  expenditures. 
Adding  $13,442.35,  for  lighting  streets  and  public  build- 
ings, to  the  commercial  receipts,  and  the  income  of  the  tax- 
payers for  the  year  was  $30,884.88,  against  an  expenditure 
of  $13,206.60.  Depreciation  would  increase  this  to  115,900, 
leaving  a  profit  of  $15,000.  The  success  of  the  plant  has 
been  so  great  that  the  rate  for  incandescent  lighting  has 
just  been  reduced  to  5  cents  per  1,000  watts,  probably  the 
lowest  meter  rate  in  the  world.1 

Batavia,  111.,  installed  a  plant  in  1891  at  a  cost  of 
$30,000.  No  arc  lamps  are  operated;  but  the  plant  fur- 
nishes 4,495  sixteen  candle-power  incandescent  lamps  to 
private  parties,  and  142  thirty-two  candle-power  for  street- 
lighting.  The  total  expense  of  operation  in  1897  was 
$5,464.06,  while  the  receipts  from  commercial  lighting  were 
$6,085.10,  showing  a  profit  of  $621.04.  Depreciation  would 
be  $900. 

For  comparison,  the  reports  of  these  and  certain  other 
cities  are  given  in  Table  XXXV.  The  inadequateness  of 
this  table  is  owing  to  the  difficulty  in  getting  complete 
information  except  by  personal  investigation.  The  basis 
of  the  data  for  each  city  is  indicated. 

MASSACHUSETTS    EXPERIENCE. 

The  Massachusetts  Board  of  Gas  and  Electric 
Light  Commissioners  in  their  report  for  January, 
1898,  have  presented  for  the  first  time  a  computa- 

1  See  Bulletin  of  the  League  of  American  Municipalities. 


MUNICIPAL  ELECTRIC  LIGHTING.         151 

tion  showing  for  each  municipal  plant  in  that 
State  the  cost  per  year  to  the  city  for  each  lamp 
employed  in  street-lighting.  The  table  is  repro- 
duced on  the  following  page,  and  the  notes  and 
explanations  furnished  by  the  Commission  are 
given  below. 

TABLE    XXXVI. 

Municipal  Electric  Plants,   Compiled  by  Massachusetts  Board 
of  Gas  and  Electric  Light  Commissioners,  1898. 

"  The  following  table  is  intended  to  show  the  cost  per 
lamp  per  year  of  the  street  electric  lights  in  the  several 
municipalities,  based  upon  the  items  shown,  and  upon  the 
average  daily  number  of  lights  used  during  the  year,  as 
given  in  the  preceding  table.  The  net  loss  in  operating  is 
the  difference  between  the  operating  expenses  and  the  in- 
come from  commercial  and  domestic  lighting :  interest  is 
the  actual  interest  paid  or  accrued  during  the  year;  and 
depreciation  is  computed  at  5  per  cent  upon  the  cost,  as 
shown  by  the  books. 

"  Note.  —  In  the  table  as  given,  when  lights  of  different 
candle-power  are  used  in  the  same  town,  the  cost  of  each 
is  computed  according  to  the  amount  of  energy  theoreti- 
cally necessary,  under  average  conditions,  to  maintain 
them  at  standard  candle-power.  Obviously  this  cost  will 
be  affected  by  the  profit  or  loss  on  the  commercial  lighting. 
In  Hudson  $79.53,  in  Marblehead  $1,216.68,  and  in  Pea- 
body  $860,  have  been  deducted  from  the  totals  given  as 
the  estimated  value  of  light  supplied  to  public  buildings, 
and  not  in  the  operating  accounts.  In  all  other  cases  the 
value  of  such  lighting  has  been  included  in  the  commercial 
lighting  income." 


152 


MUNICIPAL   MONOPOLIES. 


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MUNICIPAL   ELECTRIC  LIGHTING.         153 

The  foregoing  table,  compiled  by  the  Massachu- 
setts Board  of  Gas  and  Electric  Light  Commission- 
ers, gives  the  estimated  net  cost  to  the  city  for  its 
public  lamps,  after  deducting  commercial  income 
and  allowing  for  interest  on  the  debt  and  a  depre- 
ciation of  5  per  cent.  This  is  the  rate  mentioned 
in  the  State  law. 

In  Table  XXXVII.  I  have  computed  the  net 
cost  on  the  basis  of  3  per  cent  depreciation,  as 
advocated  in  this  paper.  I  have  also  added  col- 
umn 6,  computed  from  the  returns  given  in  the 
Board's  report  from  all  the  private  electric  com- 
panies of  the  State,  showing  the  average  prices 
paid  to  these  companies  for  corresponding  services. 
The  averages  have  been  computed  in  three  divis- 
ions, according  to  the  number  of  hours  burning 
per  night,  as  will  be  seen  in  the  foot-note.  Com- 
paring these  averages  with  my  corrected  costs  (col- 
umn 4),  it  will  be  seen  that  the  cost  to  the  city, 
with  municipal  operation,  is  less  than  the  average 
price  paid  to  companies  in  fifteen  cases,  and  is 
more  than  the  average  in  two  cases.  Compared 
with  the  estimates  made  by  the  Board  in  the  pre- 
ceding table,  at  5  per  cent  depreciation,  the  muni- 
cipal costs  are  less  in  thirteen  and  more  in  four 
cases.  Chicopee  and  Hudson  are  omitted.  The  lat- 
ter had  been  operating  only  five  and  a  half  months, 
and  the  former  only  eleven  months.  Chicopee 
purchased   its   street-plant  from   a  company,  and 


154 


MUNICIPAL   MONOPOLIES. 


then  lidded  an  incandescent  system,  charging  11.85 
cents  per  kw.-hour,  whereas  the  ruling  rates  for 
private  companies  are  20  cents  per  kw.-hour. 

TABLE   XXXVII.     Corrected   and    Compared  with  Private 
Charges  in  Massachusetts. 


1 

2 

3 

4 

5 

6 

City  or  Town. 

Deprecia- 
tion, 

Total 
Cor- 
rected. 

C.  P. 

H   c,   S 

-  g^ 

os  °  ps 
:       « 

is 

m  a 

a  c  z 

<  fc  a  h 
&-  to  z  a 

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<  <    OS    OS 

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-  S  0:  no 

>•  c  0 
•3  O  O 

Braintree      .    .    . 

§1813.74 

§8656.06 

1     25 
|  1200 

§13.34  ) 
73.35) 

7.9 

(  §19.07 
j    82.76 

Chicopee  .... 

2685.00 

14,506.83 

1200 

116.05 

7.9 

82.76 

Danvers    .... 

1053.78 

5955.11 

1200 

70.66 

6. 

82.76 

Hingham      .     .     . 

709.80 

6238.58 

32 

17.62 

5.1 

23.50 

Hudson    .... 

312.53 

1359.86 

1200 

97.13 

5.2 

74.00 

Hull 

2806.91 

13,870.26 

25 
(    30 

54.39 
20.14  '| 
8.63  1 
15.10  r 
60.42  J 

5. 

16.88 
r    32.38 

"1  23.57 
t  103.91 

Marblehead     .    . 

2478.33 

9849.45 

I      16 

1      ^ 
U200 

8.9 

Middleborougb     . 

1298.30 

6006.52 

f     25 
(1200 

15.99 ) 
63.98 j 

7.5 

(  19.07 
{    82.76 

Needham      .    .    . 

361.29 

3347.57 

25 

10.79 

4.9 

16.88 

X.  Attleborough  . 

1542.00 

7190.80 

32 

12.29 

5. 

23.50 

Peabody  .... 

2122.20 

10,726.49 

(     32 
{1200 

22.34) 
67.04) 

10.3 

j  32.38 
\  103.91 

Reading   .... 

1923.37 

10,279.07 

1200 

83.57 

5.2 

74.00 

Wakefield    .    .    . 

2008.20 

12,419.05 

1200 

86.24 

4.9 

74.00 

Wellesley     .    .    . 

431.43 

5096.31 

25 

10.15 

4.9 

16.88 

»  Average  paid  for  4  to  6  hours  per  night,  15  companies,  1,200  c.  p.,  £74.00;  23 

companies,  25  c.  p.,  £16.88;  8  companies,  30  c.  p.,  £23.50. 
Average  paid  for  6  to  8  hours  per  night,  16  companies,  1,200  c. p.,  £82.76;  14 

companies,  25  c.  p.,  £19.07;  3  companies,  30  c.  p.,  £19.00. 
Average  paid  for  8  to  11  hours  per  night,  14  companies,  1,200  c.p.,  £103.91;  8 

companies,  25  c.p.,  £23.57;  6  companies,  30  c.  p.,  £32.38. 


Note  by  the  Editor.  —  It  will  be  noticed  that,  according 
to  Table  XXXVII.,  eight  towns,  Danvers,  Hingham,  Marble- 
head,  Middleborougb,  Needliani,  North  Attleborough,  Peabody, 


MUNICIPAL   ELECTRIC  LIGHTING.         155 

and  Wellesley,  provide  themselves  with  light  cheaper  than  the 
average  charge  under  private  ownership,  even  if  5  per  cent  be 
allowed  for  depreciation  ;  while  another  town,  Braintree,  se- 
cures cheaper  light  if  depreciation  he  reckoned  at  3  per  cent, 
as  it  probably  should  be,  and  about  the  same  if  depreciation  is 
reckoned  at  5  per  cent.  The  other  five  of  the  fourteen  towns, 
Chicopee,  Hudson,  Hull,  Reading,  and  Wakefield,  are  at  higher 
expense  for  public  lighting  than  the  average  charge  under 
private  ownership ;  but  the  first  two  had  been  running  less 
than  a  year,  and  therefore  should  be  excluded  from  the  com- 
parison. Respecting  the  other  three,  it  may  be  noticed  that  in 
Hull,  the  smallest  town  of  the  group,  with  only  1,044  popu- 
lation, and  too  small,  therefore,  for  comparison  with  the  aver- 
age private  companies,  the  meter  charge  was  18.75  cents  per 
kw.-hour,  less  20  per  cent  for  prompt  payment,  as  compared 
with  the  charge  in  fifty  private  companies  of  the  State,  of 
much  larger  size,  of  20.2  cents. 

In  Reading  the  charge  for  commercial  light  is  only  f  cent 
per  lamp-hour,  which  is  about  the  same  as  13  to  15  cents  per 
kw.-hour.  In  Wakefield  the  charge  for  commercial  light  is 
one  cent  per  ampere-hour,  which  is  equivalent  to  about  20 
cents  per  kw.-hour. 

The  following  table,  XXXVIIo,  covers  certain  other  facts 
in  the  tables  of  the  Massachusetts  Report. 

In  comparing  the  figures  for  all  these  cities,  it 
must  be  remembered  that  the  cost  to  the  city  is 
not  the  only  consideration.  The  rates  charged  for 
commercial  service  are  25  to  35  per  cent  less  than 
the  rates  charged  by  companies.  Fifty  companies 
report  rates  from  15  to  28  cents  per  kw.-hour, 
averaging  20.2  cents,  against  municipal  rates  of  10 
to  20  cents,  averaging  14.46  cents.  Twenty  com- 
panies report  lamp-hour  rates  for  16  c.p.,  of  which 
sixteen  charge  one  cent  per  lamp-hour,  three  charge 


156  MUNICIPAL  MONOPOLIES. 

11  cent,  and  one  charges  /%  cent,  against  munici- 
pal rates  of  ^  in  one  city,  T7o  in  three,  and  one 
cent  in  one,  averaging  7.7  mills  or  fife  cent.  The 
contract  rates  are  so  various  that  no  averages  can 
be  computed,  but  the  ratio  will  hold  about  the 
same  as  for  kw.-hour  and  lamp-hour.  Were  the 
cities  to  charge  as  high  as  private  companies,  they 
could  probably  make  a  better  showing  on  street- 
lamps,  but  this  would  be  to  deprive  themselves  of 
one  of  the  main  advantages  of  municipal  owner- 
ship. 

RATES    TO    PRIVATE   CONSUMERS. 

These  favorable  ,showings  for  municipal  plants 
are  not  based  on  high  charges.  Table  XXXVIII. 
gives  comparative  charges  for  commercial  lights 
under  public  and  private  ownership.  A  compari- 
son of  these  rates  shows  that  private  companies 
charge  for  commercial  lighting  50  to  100  per  cent 
more  than  municipal  plants.  The  lowest  meter 
rate  charged  by  private  companies  is  in  Syracuse, 
— 10  cents  per  kw.,  —  whereas  the  usual  rate  is  20 
cents  per  kw.,  or  its  equivalent,  1  cent  per  meter- 
hour.  The  lowest  rate  charged  by  cities  is  j3o  of 
a  cent  per  lamp-hour  in  Newark,  N.J. ;  but  the 
usual  rate  is  £  cent  per  meter-hour,  and  7  to  10 
cents  per  kw.,  and  35  to  50  cents  per  month, 
against  75  cents  to  $1.25  per  month  with  private 
companies. 


MUNICIPAL   ELECTRIC  LIGHTING.         157 


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158  MUNICIPAL    MONOPOLIES. 

TABLE  XXXVIII.1       Commercial  Rates  for 


MUNICIPAL  PLANTS. 

City  or  Town. 

Per  Month. 

Lamp-Hour. 

Per  K-n-.-HouR. 

Braintree,  Mass.    .    . 

•ftc 

Chicopee,  Mass.     .    . 

11.85  c.   s 

Hingham,  Mass.    .    . 

/20  c.  Yearly, 
( 25c.  Summer. 

Hull,  Mass 

COc. 

1  c. Amp. -Hour. 
/ 1  c.  Yearly,  > 

Marblehead,  Mass.    . 

1C. 

t    Summer.    > 

Middleborough,  Mass. 

lc. 

.    .    . 

N.Attleborough,Mass. 

|C. 

Reading,  Mass.  .    .    . 

(   ic.iic-   i 
|    Amp.-Hr.  } 

15  c. 

Wakefield,  Mass.  .    . 

90  c. 

fj  c.  Amp.-Hr. 

/  G7i  c.  All-  j 

/    9  c.  dwell- 

Jamestown,  N.Y.  .    . 

]  night ;  40  c. [ 

j  iugs,  10J  fac- 

'    to  10  P.M.    ' 

'       tories. 

Lansing,  Mich.  .     .    . 

75  c. 

12  c. 

Johnson,  Vt.      .    .    . 

4  c. 

Swanton,  Vt.     .    .     . 

Jc 

Griffin,  Ga 

.    .    . 

12  c. 

Logansport,  Ind.    .    . 

5  c. 

Webster  City,  la.  .    . 

(av.)  38  c. 

10  c. 

Lisbon,  la 

40  c. 

3  c 

St.  Charles,  111.      .    . 

50  c. 

15  c. 

Benton,  111 

50  c. 

Harrington,  Kan.  .    . 

75  c. 
/  $1.25  (1st  \ 

Tecumseh,  Neb.     .    . 

J   2);  50  c.   J 
'  (above  4)  > 

Savannah,  Mo.  .    .    . 

50  c. 

15  c. 

Fulda,  Minn.      .    .     . 

50  c. 

Salisbury,  Mo.  .    .     . 

/10  p.m.,  60  a.\ 
\  12 p.m.,  80c.  J 

lc. 

20  c. 

Alexandria,  Minn.     . 

65  c. 

15  c. 

Waseca,  Minn.  .    .    . 

.    .    . 

15  c. 

Luverne,  Minn.      .     . 

10  c. 

Wells,  Minn.      .    .    . 

50  c. 

10  c. 

Litchfield,  Minn.   .     . 

40  c. 

So. 

1  St.  Peters,  Minn.  .     . 

1    9  p.m., 50c.  ■> 
|  12P.M., 65c. ) 

12Jc. 

1  Rochester,  Minn.  .    . 

Jc. 

•    •    • 

MUNICIPAL  ELECTRIC   LIGHTING. 


159 


Incandescent  Lamps  —  16-Candle  Power. 


PRIVATE  PLANTS. 

City  or  Town. 

Per  Month. 

Lamp-Hour.     Pe 

:K\v.I1k. 

Abingtou,  Mass.     .    . 

/    6  Nights    \ 

9     o 
IS  '*• 

18  c. 

Adams,  Mass.     .    .    . 

<  per    Week,  | 
I       $1.00.       ) 

1  c.  Amp.-Hour 

20  c. 

Amesbury,  Mass.    .    . 

90  c. 

Amherst,  Mass. .    .    . 

20  c. 

Andover,  Mass. .    .    . 

24  c. 

Athol,  Mass 

20  c. 

Attleborough,  Mass.  . 

90  c. 
($1.16§  for  7^ 

25  c. 

Beverly,  Mass.   .    .    . 

J      Nights,      1 
1   $1.00  for  6  j 
I     Nights.    J 

.    .    . 

25  c. 

Block  Plant,  Mass.     . 

...               1 

6§c. 

Blue  Hill,  Mass.     .    . 

$10.00  per  Year. 

1  c. 

Boston,  Mass.     .    .    . 

.    .    . 

lc. 

20  c. 

Bridgewater,  Mass.    . 

.    .    . 

lc. 

20  c. 

Lansing,  Mich.  .    .    . 
Prior  to  1895. 

/    75  c.  to  9    j 
|  P.M.,     $1.00  j 
'    to  12  P.M.    > 

Syracuse,  N.Y.  .    .    . 

10  c. 

Little  Rock,  Ark.  .    . 

lc. 

Colorado  Springs,  Col. 

1  c. 

Leadville,  Col.   .    .    . 

$1.00 

lie 

Logansport,  Ind.    .    . 

lc. 

San  Jose,  Cal.     .    .    . 

lie 

Baton  Rouge,  La.  .    . 

50  c. 

Marseilles,  111.   .    .    . 

40  c. 

Chicago,  111 

lc. 

Wichita,  Kan.    .    .    . 

.    .     . 

1  c. 

Topeka,  Kan.      .    .    . 

.    .    . 

lc. 

St.  Louis,  Mo.     .     .     . 

1-li  c. 

Duluth,  Minn.    .    .    . 

.    .    . 

lc. 

Springfield,  Mo.      .    . 

.    .    . 

lc. 

1  The  figures  for  Massachusetts  are  taken  from  the  Report  of 
the  Gas  and  Electric  Light  Commissioners.  Those  for  cities  out- 
side Massachusetts  are  from  reports  made  to  me  or  to  the  South 
Norwalk  investigating  committee,  or  they  have  been  collated  by 
Mr.  Parsons  in  the  Arena,  August,  1895. 


160 


MUNICIPAL   MONOPOLIES. 

TABLE  XXXVIII. 


MUNICIPAL  PLANTS.  —  Continued. 

City  ok  Town. 

Per  Month. 

Lamp-Hour. 

PeuKiv.-Hocr. 

Marshall,  Minn.    .    . 

t%c- 

Coldwater,  Mich.  .    . 

ftc 

lie. 

Evart,  Mich 

35  c. 

Hamilton,  N.Y.      .    . 

lie 

Westfield,  N.T.     .    . 

50  c. 

he 

Madison,  N.J.   .    .    . 

10  c. 

Newark,  N.J.    .    .    . 

i30c. 

Hamilton,  Ohio     .    . 

60  c. 

8  c. 

Jackson,  Ohio    .     .     . 

60  c. 

10  c. 

Willoughby,  Ohio  .    . 

(Stores)  25  c. 

8  c. 

DeGraff,  Ohio    .    .    . 

25C.-40  c. 
,   70  c.  to  10   j 

10  c- 

Galion,Ohio  .... 

J  lamps,  65  c.  [ 
i  to  16  lamps.  ) 

10  c. 

Quakertown,  Pa.    .    . 

12  c. 

Schuylkill  Haven,  Pa. 

25  c-65  c. 

Sharpshurg,  Pa.     .    . 

,  25,  50,  75  c,  j 

8  c. 

Wytheville,  Va.     .    . 

{   All-night.  | 

Salem,  Va 

40  c-65  c. 

20  c. 

Rice  Lake,  Wis.     .    . 

50  c. 

20  c. 

American  cities  have  not  had  enough  experience 
in  commercial  lighting  to  show  the  possibilities  of 
this  branch  of  service.  The  first  year  or  two  must 
usually  be  expected  to  incur  a  loss.  This  was 
true  of  British  cities,  but  the  remarkable  financial 
results  which  those  cities  have  attained  in  the 
third  and  succeeding  years  of  their  commercial 
business  are  a  promise  of  even  more  brilliant  re- 
sults in  America.  The  pioneer  municipalities 
which  we  have  already  cited,  like  Logansport,  Ind., 
Batavia,  111.,  and  Jamestown,  N.Y.,  are  revealing 


MUNICIPAL   ELECTRIC  LIGHTING. 


161 


Continued. 


PRIVATE   PLANTS. 

City  or  Town. 

Per  Month. 

Lamp  Hoik. 

PerKw.Hi:. 

Bath,  Me 

1  c. 

Birmingham,  Conn.    . 

20  c. 

Omaha,  Neb.  .     .     . 

20  c. 

Binghamton,  N.Y. 

lc. 

New  York  City,  N.Y. 

1  c. 

Brooklyn,  N.Y.       .     . 

1  c. 

Cincinnati,  Ohio     .    . 

|c. 

15  c. 

Mount  Holly,  N.J.      . 

lc. 

New  Brunswick,  N..T. 

ftc. 

16  c. 

Washington,  D.C.  .    . 

15  c. 

Philadelphia,  Pa.  .    . 

Jc 

15  c. 

Harrisburg,  Pa.      .    , 

HO  c.  not  over  l^i 
|     Hour,  $1.00     \ 

15  c. 

Wilmington,  Del.   .    . 

i65c- 

~|  Lamp  ;  60-80  c.  j 
\_  for  3  or  more.  J 

unexpected  and  surprising  benefits  for  citizens  and 
taxpayers  in  the  line  of  electrical  supply.  Not 
until  cities  undertake  the  work  can  we  hope  for 
such  a  low  rate  that  the  use  of  electricity  can  be- 
come universal,  and  the  homes  and  shops  can  be 
abundantly  supplied,  not  only  with  light,  but  also 
with  power  for  all  small  machinery. 


BRITISH    EXPERIENCE. 

While  the  preceding  pages  have  been  devoted 
mainly  to  American  cities,  the  argument  for  muni- 
cipal ownership  is  notably  strengthened  when  we 
examine  the  electrical  enterprises  of  the  cities  of 
Great  Britain.     With  the  careful  and  business-like 


162 


M  UMCIl'AL  MONOPOLIES. 


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administration  of  those 
cities,  the  problem  can  be 
approached  more  nearly 
on  its  merits.  That  the 
decision  is  overwhelm- 
ingly in  favor  of  public 
ownership  may  be  in- 
ferred from  the  fact  that, 
of  the  84  applications  be- 
fore the  Local  Govern- 
ment Board  in  January, 
18  98,  for  "Electric 
Lighting  Provisional  Or- 
ders," 64  were  made  on 
the  part  of  municipalities 
and  urban  or  rural  com- 
munities, and  but  20  on 
the  part  of  the  private 
companies,  and  of  this 
20,  there  were  7  which 
were  applications  for  ex- 
tensions, leaving  only  13 
new  private  enterprises, 
against  64  new  munici- 
pal ones.1 

The  substantial  ground 
for    this    preference,    as 

1  See   The  Electrician,  Jan 
7,  1898. 


166  MUNICIPAL  MONOPOLIES. 

well  as  an  interesting  contrast  with  American  en- 
terprises, will  be  seen  in  Table  XXXIX.,  where 
I  have  compiled,  from  Garcke's  "Manual  of  Elec- 
trical Undertakings"  for  1898,  the  costs,  charges, 
and  profits  per  kilowatt-hour  of  product  sold  in 
public  and  private  undertakings.  It  appears,  from 
columns  9  and  11,  that  the  average  charge  for 
service  by  cities  (10.23  cents  per  kw.)  is  12  per 
cent  less  than  the  charges  made  by  companies 
(11.62  cents  per  kw.),  whereas  in  American  cities 
the  charges  are  40  to  50  per  cent  less.  This 
shows,  as  we  have  already  noted,  the  strong  em- 
phasis on  profit-making  by  municipal  undertakings, 
contrasted  with  the  American  policy  of  low  charges 
and  extensive  use.  The  gross  profit  per  kw.  in 
British  public  plants  (3.93  cents)  is  40  per  cent 
of  the  revenues,  and  is  less  than  the  apparent 
profit  in  private  undertakings  (4.43  cents  per  kw.). 
While  the  operating  expenses  of  private  companies 
are  7.19  cents  per  kw.  sold,  they  are  only  6.26 
cents  with  municipal  undertakings.  The  differ- 
ence—  .93  cents  per  kw.  —  is  equal  to  $16.74  per 
year  on  an  estimated  consumption  of  1800  kw. 
per  year  for  an  all-night  arc  lamp  of  2000  c.  p.  in 
favor  of  the  municipal  enterprises.  And  yet  the 
cost  of  production  in  the  private  enterprises  should 
be  much  less  than  in  the  public  ones,  since  the 
average  output  per  year  is  nearly  double. 

In  Table  XL.  the  operating  expenses  of  the  two 


MUNICIPAL    ELECTRIC  LIGHTING.         167 


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168  MUNICIPAL    MONOPOLIES. 

largest  American  municipal*  stations  which  have 
published  the  records  of  their  output  in  kilowatt- 
hours  are  compared  with  the  four  cities,  Glasgow, 
.Manchester,  Dublin,  and  Aberdeen  (on  the  basis 
of  the  total  kilowatts  generated,  not  sold,  as  in 
Table  XXXIX.),  and  with  Foster's  estimate  for 
the  fourteen  American  municipal  stations  noted 
above  in  Table  XXI.,  and  his  citation  of  Cromp- 
ton's  English  stations.  The  high  labor  cost  of  the 
American  stations  is  noticeable  ;  but,  notwithstand- 
ing labor  in  Allegheny  and  Detroit  is  145  per  cent 
and  405  per  cent  higher  than  in  Manchester,  and 
the  cost  of  fuel  is  but  slightly  different,  yet  the 
total  cost  for  the  American  cities  is  but  10  per 
cent  higher  than  that  of  the  model  British  muni- 
cipality, and  but  little  above  Crompton's  ideal 
English  station.  Manchester  is  the  recognized 
banner  municipality  of  Great  Britain  in  electrical 
supply,  the  cost  of  operation  being  materially  be- 
low that  of  all  other  cities.  The  smaller  American 
cities,  although  bearing  nearly  double  the  labor 
cost,  have  a  total  cost  less  than  5  per  cent  above 
the  twenty-three  English  stations. 

QUALITY   AND    "OUTAGES." 

Nothing  has  been  said  heretofore  as  to  the  quality 
of  service  rendered  by  public  and  private  plants. 
It  has  been  assumed,  in  the  comparisons  that  have 


MUNICIPAL  ELECTRIC  LIGHTING.        169 

been  made,  that  the  quality  was  uniform  in  all 
cases.  But  it  must  be  remembered  that  there  are 
two  qualifications  necessary  before  we  can  know 
that  the  candle-power,  for  example,  is  relatively 
as  great  as  it  appears.  These  are  the  quality  of 
the  light  and  the  "  outages."  In  every  municipal 
plant,  almost  without  exception,  the  people  of  the 
locality  are  found,  on  personal  inquiry,  to  speak  in 
enthusiastic  terms  of  the  superior  quality  of  light 
they  are  getting.  Unfortunately  this  field  of  elec- 
tric lighting  has  not  been  adequately  tested ;  and 
but  few  cities,  either  with  public  or  with  private 
plants,  have  any  record  of  photometric  tests  of 
the  efficiency  of  their  lights.  The  candle-power 
is  the  "nominal"  2,000  candle-power  of  French 
standard,  which  Slingo  &  Brooker1  estimate  as 
giving  actually  only  875  candle-power  when  the 
current  is  ten  amperes  and  the  voltage  fifty,  so 
that  this  amount  of  light  is  produced  at  a  cost 
of  500  watts.  As  the  usual  power  varies  from  425 
to  475  watts  per  lamp,  and  municipal  officials 
never,  as  far  as  I  know,  are  provided  with  pho- 
tometric appliances,  it  is  within  the  power  of  pri- 
vate companies  to  diminish  the  candle-power  below 
the  standard  required  in  their  contracts.  As 
long  as  exact  measurements  are  lacking,  we  are 
compelled  to  depend  upon  the  common  opinion  of 
the  locality,  which  is  indeed  not  an  accurate  judge. 
1  Electrical  Engineering,  London,  1895,  p.  594. 


170  MUNICIPAL  MONOPOLIES. 

This  general  satisfaction  of  citizens  in  their  light 
is  one  of  those  local  factors  which  statistics  cannot 
present,  but  which  go  far  in  determining  the  pref- 
erence for  municipal  plants.  Dunkirk  is  given  by 
Francisco  as  furnishing  718  candle-power  per  hour 
for  one  cent;  but  taking  into  account  the  fact  that 
the  dynamos  there  are  run  at  eighteen  amperes, 
and  520  watts  are  delivered  to  each  lamp,  and  that 
the  general  impressions  of  citizens  and  visitors 
unite  in  describing  them  as  the  brightest  lights  to 
be  found  anywhere  in  street-lighting,  it  is  evident 
that,  in  addition  to  his  manipulation  of  costs,  his 
estimate  of  quality  also  does  injustice  to  the 
plant. 

In  the  matter  of  "  outages,"  too,  the  records  for 
private  plants  are  usually  quite  imperfect.  De- 
ductions are  made  from  the  contract  price  before 
payment  is  made  by  the  city ;  but  here  is  room 
for  the  political  influence  of  the  companies.  The 
policemen  are  usually  required  to  report  outages ; 
and  in  Syracuse  the  convenient  practice  obtains 
of  reporting  to  the  electrical  company,  which  then 
reports  to  the  city  on  its  own  outages. 

For  the  city  of  Detroit  the  following  comparison 
is  made,  by  the  Public  Lighting  Commission,  of 
the  outages  under  private  and  under  municipal 
operation.     (Table  XLI.) 


MUNICIPAL   ELECTRIC  LIGHTING. 


171 


TABLE    XLI. 
Contractor  Operating  1,279  Lamps,  1893-94. 


Month. 

No.  Lamps 
Out. 

Hours  Out. 

Pee  Cent 
Lamps  Out. 

Per  Cent 
Hours  Out. 

October     .     . 
November     . 
December     . 
January  .     . 
February 
March .     .     . 
April    .     .     . 
May     .     .     . 
June    .     .     . 

1,319 
1,372 
2,710 
787 
2,898 
1,177 
1,729 
1,273 
1,679 

6,825 

11,988 

20,485 

4,304 

17,642 

5,317 

8,930 

4,833 

6,102 

3.326 
3.575 
6.835 
1.985 
8.092 
2.943 
4.506 
3.211 
4.375 

1.500 
2.455 
3.867 
0.834 
4.131 
1.270 
2.551 
1.543 
2.186 

City  Plant  Operating  1,483  Lamps,   1895-96. 

Month. 

No.  Lamps 
Out. 

Hours  Out. 

Per  Cent 
Lamps  Out. 

Per  Cent 
Hours  Out. 

October     . 
November 
December 
January    . 
February  . 
March  .     . 
April     .     . 
May       .     . 
June     .     . 

152 
95 

138 
47 
42 
28 
84 
63 
25 

1,040 
774 
940 
372 
301 
235 
350 
283 
137 

0.335 
0.266 
0.300 
0.116 
0.098 
0.061 
0.179 
0.138 
0.056 

0.201 
0.137 
0.154 
0.062 
0.059 
0.048 
0.088 
0.080 
0.042 

The  following  table,  compiled  from  the  reports 
of  the  commission,  shows  the  remarkable  improve- 
ment which  the  municipal  management  has  effected 
in  the  course  of  two  years  in  the  matter  of  outages, 
and  shows  that  a  municipal  plant,  in  the  quality  of 
its  service,  is  more  likely  to  improve  by  experience 
than  a  private  plant.     (Table  XLII.) 


172 


MUNICIPAL   MONOPOLIES. 


TABLE    XLII.       Outages,  Detroit  Municipal  Lighting. 


Number  Lamps. 

Total  of 

Total  of 

Month. 

Lamp  Hours 

Lamp  Holes 

I'nvate. 

Public. 

Scheduled. 

Oit. 

July,             1895   .     . 

590 

700 

163,257 

2,426.33 

Augus;,          " 

590 

727 

191,322 

1,839.02 

September,    " 

590 

814 

242,598 

4,239.28 

October,          " 

1446 

519,462 

1,040.10 

November,     " 

1483 

577,075 

773.34 

December,     " 

1498 

629,013 

940.29 

January,      1896 

1493 

607,517 

371.38 

February,       " 

1481 

510,790 

301.30 

March, 

1479 

476,000 

234.41 

April,             " 

1479 

396,965 

349.41 

May, 

1477 

346,649 

283.18 

June,               " 

1480 

316,291 

148.05 

July, 

1484 

340,138 

134.34 

August,          " 

1492 

389,958 

288.53 

September,    " 

1512 

449,801 

96.23 

October,         " 

1562 

551,863 

157.54 

November,     " 

1585 

604,805 

88.19 

December,     " 

1590 

660,023 

80.01 

January,      1897 

1594 

642,115 

92.22 

February,       " 

1589 

537,783 

73.18 

March,           " 

1589 

530,845 

95.22 

April, 

1590 

434,804 

217.19 

May, 

1589 

385,922 

32.54 

June, 

1593 

345,243 

13.48 

Tf  we  compare  individual  months  under  private  and  pub- 
lic ownership,  we  have,  for  example,  the  following.     (Table 

XLIII.) 

TABLE   XLIII.       Outages,  Detroit. 


January, 
January, 
January. 

June, 
June, 
June, 


1894. 

1896. 
1897. 

1894. 
1896. 

1897. 


6,304  hours^ out. 
371 
92 

6,102 

14S 

13 


Private. 

Public. 

Public. 

Private. 

Public. 

Public. 


MUNICIPAL   ELECTRIC  LIGHTING. 


173 


TABLE   XLIII.  —  Continued. 


April, 
April, 
April, 


1894. 
1896. 
1897. 


December,  1S93. 
December,  1895. 
December,  1896. 


8,930  bows  out. 
349 
217 

20,485 

940 

80 


Private. 

Public. 

Public. 

Private. 

Public. 

Public. 


It  is  also  true  that  a  steady  improvement  has  been  shown 
for  the  second  year  of  municipal  ownership,  1896-1897, 
both  in  absolute  amounts  and  relatively  as  well.  A  com- 
parison of  individual  months  shows  the  same  superiority  of 
public  over  private  ownership.  Not  only  does  the  city  of 
Detroit  get  a  steadier  light,  but  the  brilliancy  of  the  same 
is  greater  than  that  obtained  from  private  corporations. 
The  amount  of  the  current  used  is  maintained  at  9.6 
amperes,  and  the  lamps  burn  at  their  full  rated  candle- 
power. 

Such  facts  as  these  not  only  may  give  us  confidence  that 
municipal  enterprise  does  better  work  than  private  compa- 
nies in  the  field  of  electric  lighting,  but  they  also  lead  us 
to  look  with  suspicion  upon  any  statistics  favoring  private 
operation  which  are  based  upon  candle-power  cost,  even  if 
conscientiously  compiled. 


POLITICS. 

The  foregoing  statistical  comparisons  may  be 
taken  as  indicative  that  the  great  majority  of  the 
three  hundred  cities  and  villages  now  furnishing 
light  are  actually  getting  better  service  at  less  cost 
than  those  which  depend  upon  private  companies. 
It  is  objected  that  such  cannot  be  the  case,  espe- 


174  MUNICIPAL  MONOPOLIES. 

cially  in  our  large  cities,  because  of  the  flagrant 
municipal  corruption  and  inefficiency.  Business 
ability  and  integrity,  it  is  said,  are  excluded  from 
municipal  office,  appointments  are  made  as  a  re- 
ward of  political  service,  and  the  municipal  plant 
soon  becomes  burdened  with  barnacles  who  draw 
pay  without  work.  I  do  not  deny  that  such  is 
often  the  case.  But  I  maintain  that  nine-tenths 
of  the  existing  municipal  corruption  and  ineffi- 
ciency result  from  the  policy  of  leaving  municipal 
functions  to  private  parties ;  and  that  an  essential 
part  of  the  present  unparalleled  awakening  of 
civic  conscience  on  the  part  of  all  classes  of  the 
people  is  the  desire  for  municipal  ownership  of 
franchises.  As  the  people  become  aroused  to  the 
degradation  of  their  politics  and  to  the  need  of  re- 
form, their  attention  is  concentrated  on  the  chief 
source  of  that  degradation,  the  underhanded  and 
often  high-handed  domination  of  city  officials  and 
machine  politics  by  the  corporations  whose  life  is 
maintained  by  city  franchises.  It  is  from  them 
that  the  politicians  get  their  campaign  funds. 
Contrast  the  results  of  municipal  ownership  above 
given  with  the  following:  — 

In  a  city  of  100,000  population  a  private  company  is 
organized  in  the  early  days  of  electric  lighting  with  a  cap- 
ital of  $100,000,%.  supposed  t®  have  been  actually  paid  up. 
In  1889  the  company  is  "reorganized,"  increasing  its  cap- 
ital by  $130,000,  $50,000  of  which  is  for  a  "  license  "  to  use 


MUNICIPAL   ELECTRIC  LIGHTING.         175 

incandescent  lights,  which  it  had  already  been  using  for 
several  years,  selling  the  entire  increase  in  capital  at  from 
90  to  par.  It  has  a  contract  for  municipal  lighting  at 
$144  per  arc  per  year,  but  has  no  definite  franchise  for 
private  lighting.  In  1890  a  new  company  of  eminent  and 
respectable  citizens  is  organized,  at  the  head  of  which  is 
the  "  boss  "  of  one  of  the  political  party  organizations.  This 
gentleman  has  associated  with  him  nine  prominent  citizens 
who  control  the  avenues  of  public  opinion,  all  the  news- 
papers, directly  or  indirectly,  and  both  political  parties. 
They  come  before  the  Common  Council  promising  cheaper 
light.  They  get  a  franchise  from  the  aldermen  by  well- 
known  methods.  They  invest  only  enough  money  to  erect 
two  or  three  poles,  and  so  hold  their  franchise.  They  then 
make  overtures  to  the  old  company,  which  again  is  "  re- 
organized." This  time  the  capitalization  is  increased  to 
$1,6-40,000  in  stock  and  bonds,  of  which  $400,000  in  stock 
is  given  to  these  ten  respectable  citizens  who  procured  the 
franchise,  and  of  which  $750,000  is  in  bonds  at  6  per  cent 
interest,  making  a  fixed  charge  of  $45,000  in  interest  yearly 
on  a  plant  that  could  be  duplicated  for  less  than  $1,000,000. 
Here  is  a  case  where  ten  of  the  most  respectable  business- 
men and  lawyers  of  the  city  have  placed  their  pecuniary 
interest  in  direct  antagonism  to  good  and  honest  govern- 
ment. They  have  become  the  powerful  opponents  of  all 
public-spirited  officials  who  attempt  to  get  fair  terms  for 
the  city  in  this  particular  business  of  controlling  the  sup- 
ply of  electric  light  and  power;  and  no  matter  how  they 
may  afterwards  "reform,"  and  demand  honest  government, 
the  people  at  large  have  learned  to  discount  what  they  say, 
and  to  distrust  their  efforts  in  subsequent  movements  for 
civic  reform.  Strangely  enough,  two  or  three  of  these  very 
same  men,  being  appointed  without  salary  to  positions  on 
the  Board  of  Water  Commissioners,  to  construct  and  operate 


176  MUNICIPAL  MONOPOLIES. 

a  water-works  plant  owned  by  the  city,  exhibited  the  very 
highest  integrity  and  patient  industry  in  promoting  the 
city's  interests,  and  in  constructing  a  plant  of  which  the 
citizens  are  justly  proud. 

We  may  call  upon  our  eminent  business-men  to 
arouse  from  their  lethargy,  and  to  take  an  active 
part  in  municipal  reform ;  but  so  many  of  them 
have  been  mixed  in  these  "jobs"  that  the  people 
at  large  have  no  confidence  in  their  leadership,  nor 
in  any  candidate  for  office  whom  they  are  known 
to  advocate.  Such  business-men  need  reforming 
themselves ;  but  this  is  to  be  done,  not  by  appeal- 
ing to  them  after  the  method  of  the  revivalist,  but 
by  removing  temptation  from  their  way,  and  giving 
them  an  opportunity  really  to  serve  the  community 
in  a  public  and  honorable  way  through  the  em- 
ployment of  their  distinguished  business  abilities. 
Private  ownership  of  municipal  monopolies  forces 
them  and  all  whom  they  can  influence  to  oppose 
the  good  of  the  city.  Municipal  ownership  makes 
it  to  their  interest  to  place  their  abilities  at  the 
service  of  the  city,  and  to  take  an  honest  pride  in 
the  good  they  can  contribute  to  it. 

I  do  not  for  a  moment  deceive  myself  by  think- 
ing that  this  movement  for  municipal  ownership 
is  child's  play,  or  that  the  companies  now  in  pos- 
session will  relinquish  their  hold  without  resorting 
to  the  most  determined  and  unscrupulous  devices. 
There  are  many  indications  that  they  are  organiz- 


MUNICIPAL   ELECTRIC  LIGHTING.  Ill 

ing  throughout  the  country  for  an  attack  both 
upon  municipal  ownership  and  upon  the  integrity 
of  municipal  officials.  These  concerted  attacks 
upon  municipal  integrity  need  not  be  looked  upon 
as  discouraging.  More  than  anything  else  they 
will  arouse  the  common  people  from  their  lethargy, 
and  will  disabuse  them  of  their  fond  reliance  on 
mere  respectability  as  a  guaranty  of  public  spirit, 
will  direct  their  attention  to  the  true  source  of 
municipal  corruption,  and  will  discipline  them  in 
organized  resistance  and  in  aggressive  movements 
upon  the  citadel  of  the  corruption  funds.  In  the 
end  £his  discipline  and  organization  wTill  be  the 
guaranty  of  efficient  administration  when  once 
ownership  is  obtained.  It  is  mainly  in  those  cities 
like  Detroit,  which  have  had  a  hard  training  for 
several  years  in  open  battle  with  the  franchise 
holders,  that  we  may  look  for  that  alert  public 
spirit  and  jealous  determination  which  will  make 
municipal  ownership  a  lasting  success. 

It  is  this  struggle  with  monopolists,  too,  which 
will  force  the  people  to  the  adoption  of  administra- 
tive machinery  better  adapted  to  municipal  opera- 
tion of  industry  than  any  that  we  now  have.  It 
must  be  confessed  that  the  legal  organization  of 
our  municipalities  is  not  yet  perfected  for  the  es- 
pousal of  public  ownership  on  any  large  scale. 
The  experience  of  English  and  many  American 
cities   indicates    the    following  administrative   re- 


178  MUNICIPAL   MONOPOLIES. 

forms  as  necessary  to  accompany  or  precede  muni- 
cipal ownership. 

1.  State  supervision  for  cities,  similar  to  that 
of  the  Local  Government  Board  of  England,  or 
that  of  the  Board  of  Gas  and  Electric  Light  Com- 
missioners of  Massachusetts,  or  of  the  Public 
Examiners  of  Minnesota  and  Dakota.  A  State 
municipal  board,  like  that  proposed  in  New  York 
by  the  Commission  on  Cities  of  the  Third  Class, 
would  prescribe  a  most  important  requisite ;  uni- 
form methods  of  municipal  book-keeping  would 
audit  accounts  of  cities,  and  would  direct  the 
proper  entries  for  new  construction,  depreciation, 
etc.  Such  a  board  would  sanction  loans,  and  set 
the  terms  of  years  for  repayment,  and  the  pro- 
visions of  a  sinking-fund.  In  this  way  the  consti- 
tutional limitation  on  municipal  indebtedness  could 
be  replaced  by  a  more  elastic  limit,  on  the  prin- 
ciple that  the  acquisition  of  a  productive  property 
is  really  a  lessening  of  the  city's  net  debt,  instead 
of  an  increase.  The  board  would  publish  annual 
reports,  giving  details  concerning  finances,  costs 
of  production,  revenues,  etc.,  of  the  various  cities, 
thus  furnishing  the  basis  for  intelligent  improve- 
ment in  administration,  and  for  further  acquisition 
of  municipal  plants.1 

1  See  article,  "  State  Supervision  for  Cities,"  by  J.  R.  Commons, 
in  Annals  of  American  Academy  of  Political  and  Social  Science, 
March,  1895.     Also  Goodnow,  "Municipal  Home  Rule,"  N.Y., 


MUNICIPAL   ELECTRIC  LIGHTING.  179 

2.  The  substitution  of  unsalaried  municipal 
boards  or  commissions,  instead  of  the  Board  of 
Aldermen,  as  the  administrative  head.  These 
boards  should  be  composed  of  five  or  six  members, 
elected  by  the  people,  or  appointed  by  the  mayor, 
one  member  to  be  chosen  each  year  for  a  term 
of  five  or  six  years,  thus  giving  continuity  of  ser- 
vice. The  legislative  branch  of  our  cities  has  so 
hopelessly  decayed,  that,  until  something  like  pro- 
portional representation  is  adopted,  no  additional 
powers  should  be  granted  to  it.  The  successful 
electrical  plants  throughout  the  country  in  larger 
cities  are  under  control  of  commissions.  Where- 
ever  the  spoils  system  and  corruption  exist,  we 
may  expect  to  find  the  aldermen  in  control.  Those 
who  argue  against  municipal  ownership,  and  who 
appeal  to  their  "  practical "  experience  rather  than 
the  opinion  of  "theorists,"  do  not  seem  to  have 
noticed  this  important  difference  in  methods  of 
administration.  Because  the  aldermen  are  corrupt 
and  inefficient,  they  assume  that  the  entire  gov- 
ernment and  the  people  themselves  are  so,  whereas 
the  difficulty  lies  only  in  defective  and  antiquated 
machinery  of  administration.  Let  the  aldermen 
be  displaced  by  a  properly  constituted  commission, 
as  above  indicated,  and  the  electric  administration 

1895,  and  "Municipal  Problems,"  N.Y.,  1897,  and  Maltbie,  "  Eng- 
lish Local  Government  of  To-day,"  N.Y.,  1897,  Columbia  Uni- 
versity Publications. 


180  MUNICIPAL   MONOPOLIES. 

becomes   equal   to   the  best  of    the  ideal   British 
municipalities. 

3.  The  referendum  and  initiative.  The  refer- 
endum is  already  universal  upon  all  questions  of 
purchase  or  installation  of  a  municipal  plant.  It 
should  also  be  required,  along  with  the  initiative, 
upon  questions  of  the  sale  or  lease  of  a  plant,  and 
the  appropriations  for  improvements.  Had  it  been 
in  force  in  Philadelphia,  it  is  needless  to  say,  the 
recent  scandalous  lease  of  the  gas-plant  could 
not  have  been  consummated.  Councils  of  that 
city  refused  to  submit  the  question  to  the  people, 
although  earnestly  petitioned  to  do  so  by  the  Muni- 
cipal League.  The  obligatory  referendum  is  also 
necessary,  as  the  only  thorough  means  for  banish- 
ing bribery  and  the  corrupt  use  of  money  from 
municipal  politics. 

4.  A  civil  service  reform  system,  in  which  the 
superintendent  or  electrical  engineer  at  the  head 
of  the  plant  should  be  appointed  on  merit  and  held 
personally  responsible,  and  then  should  be  entirely 
free  to  appoint  and  remove  all  subordinates  with- 
out interference  from  an  outside  civil  service  com- 
mission. This  is  the  practice  generally  where  a 
board  of  commissioners,  instead  of  the  aldermen 
or  mayor,  has  charge  of  the  plant. 


III. 

THE  LATEST 
ELECTEIO  LIGHT  REPORTS. 


THE  LATEST 
ELEOTEIC    LIGHT   EEPORTS. 

By  EDWARD  W.  BEMIS,  Ph.D. 

Professor  of  Economic  Science,  Kansas  State  Agricultural  College. 


It  is  the  aim  of  the  present  chapter  to  embody 
such  results  of  personal  investigation  of  the  reports 
of  public  and  private  electric-light  plants  as  the 
writer  has  been  able  to  gather  from  an  extensive 
correspondence  and  some  travel. 

No  complete  report  of  a  municipal  plant  will  be 
omitted,  whether  a  good  or  bad  example  of  city 
ownership,  but  it  has  been  necessary  to  discard 
many  inadequate  reports.  After  all,  what  is 
wanted  is  not  so  much  exhaustive  information  of 
all  plants,  as  a  somewhat  detailed  study  of  typical 
successes  and  failures.  In  a  field  where  one  city 
has  been  successful,  another  should  be  ashamed  to 
fail.  For  many  a  city  to  defer  action  on  the  prob- 
lem of  electric  lighting  until  exhaustive  statistics 
of  every  plant  can  be  obtained,  or  even  to  wait  the 
two  years  likely  to  intervene  before  the  reports  of 
the  United  States  Department  of  Labor  are  avail- 

183 


184  MUNICIPAL  MONOPOLIES. 

able,  is  out  of  the  question.  Old  franchises  are 
expiring;  the  granting  of  new  ones,  or  direct  city 
ownership  and  operation,  requires  immediate  action 
in  scores  of  municipalities. 

Commenting  on  a  plea  for  delay  made  by  Mr. 
Allen  R.  Foote,  a  former  secretary  of  the  National 
Electric  Light  Association,  Mayor  John  Mac  Vicar 
thus  writes,  in  the  Progressive  Age  of  Feb.  15, 
1898  :  — 

"  Had  Springfield,  111.,  heeded  your  plea  seven  years  ago, 
and  suspended  action,  that  city  would  still  be  paying  $137 
per  2,000  candle-power  lamp  for  street-lighting,  instead  of 
the  sum  it  now  pays,  practically  $60  per  lamp. 

"  Had  Rockford,  111.,  waited  for  these  statistics  to  guide 
it,  it  would  still  be  paying  $125  per  lamp,  instead  of  $52 
per  lamp.  This  latter  city  will  serve  as  an  example  to 
illustrate  that  a  loyal  City  Council,  aided  by  a  competent 
engineer,  will  serve  in  lieu  of  statistics  to  determine  the 
cost  of  street-lighting. 

"  About  two  years  ago  Rockford  employed  an  engineer 
to  make  estimates,  plans,  and  specifications  for  a  municipal 
lighting-plant.  The  city  had  been  paying  its  local  com- 
pany in  the  neighborhood  of  $125  per  annum  for  each 
2,000  candle-power  arc  lamp  burning  all  night  and  every 
night.  Bids  were  received,  and  a  contract  about  to  be  en- 
tered into,  for  the  erection  of  a  municipal  plant,  when  the 
local  company,  after  having  exhausted  every  means  at  hand 
to  defeat  the  project,  appeared  before  the  City  Council  and 
asked  that  the  city  abandon  its  intention  of  building  a 
municipal  plant,  and  award  to  it  a  contract  for  lighting  at 
the  rates  estimated  by  the  city's  engineer,  to  be  the  cost  of 
producing  lights  under  municipal  ownership,  namely,  $56 


LATEST  ELECTRIC  LIGHT  REPORTS.      185 

per  lamp.  The  city,  preferring  to  own  its  own  pole  line, 
contracted  with  the  old  company  for  $52  per  2,000  candle- 
power  lamp,  burning  all  night  and  every  night.  The 
contract  is  for  a  term  of  five  years,  with  the  privilege  of  an 
additional  five  years  if  the  city  so  desires. 

"  Or  had  the  city  of  Des  Moines  four  years  ago  heeded 
your  plea,  or  aocepted  statistics  proffered  by  its  water  com- 
pany, it  would  not  have  reduced  its  public  and  private 
rates  33£  to  40  per  cent  by,  municipal  control ;  nor  would 
the  Supreme  Court  of  Iowa  have  pronounced  these  rates  rea- 
sonable, had  it  been  guided  by  the  showing  of  the  water 
company's  expense  of  operation,  including  interest  on  ex- 
cessive capitalization,  exorbitant  salaries  to  officials,  etc. 

"  Neither  would  the  city  of  Des  Moines,  had  it '  suspended 
judgment  and  action,'  now  be  under  contract  for  the  erec- 
tion of  a  municipal  lighting-plant,  to  cost  $105,000,  which 
contractors  guarantee  to  operate  for  $65  per  arc  lamp, 
burning  all  night  and  every  night.  Nor  would  it,  in  self- 
defense,  after  being  temporarily  enjoined  by  the  attorneys 
of  the  private  lighting-company  from  erecting  its  plant, 
have  ventured  to  reduce  the  rates  by  municipal  regula- 
tion from  $126  and  $96  to  $75  and  $65  per  lamp.  The 
city's  information  which  led  it  to  believe  that  these  would  be 
reasonable  rates  was  not  gathered  from  statistics,  but  from 
estimates  of  qualified  engineers.  No  doubt  the  General 
Electric  Company  would  contest  the  right  of  our  city  to 
name  this  as  reasonable  compensation  could  it  induce  the 
courts  to  recognize  statistics  such  as  you  suggest  as  'the 
only  proper  basis  for  comparisons.' 

"  Statistics  received  from  the  General  Electric  Company 
proved  (?)  that  such  a  plant  could  not  be  built  for  less  than 
$250,000,  'and  might  cost  $350,000,'  and  could  not  be 
operated  for  less  than  we  were  then  paying,  namely,  $126 
per  lamp.    Instead  of  accepting  these  statistics  '  as  the  only 


186  MUNICIPAL   MONOPOLIES. 

proper  basis  for  comparisons,'  we  relied  upon  our  engineer's 
estimates  of  expense  of  erection  and  operation  of  the  plant; 
and  they  corresponded  almost  exactly  with  the  terms  of  the 
contract  we  succeeded  in  securing,  convincing  us  that  such 
estimates  are  more  reliable  and  a  better  guide  than  statistics. 
"  It  is  true  that  the  company  threatens  to  bring  suit  to 
resist  these  regulations,  but  the  fact  that  it  is  accepting  the 
rates  of  this  regulating  ordinance  in  full  of  all  claims  gives 
us  the  right  to  presume  that  it  does  not  wish  to  open  its 
books  to  the  public  and  testify  to  the  cost  of  producing 
light.  It  possibly  prefers  to  await  the  statistics  of  the 
United  States  Commissioner  of  Labor,  hoping  to  use  them 
as  a  true  basis  of  comparisons." 

It  is  indeed  difficult  to  gather  statistics  of  any 
value  upon  electric  and  gas  lighting.  The  bias  of 
the  investigator,  the  secretiveness  of  the  private 
companies,  the  poor  book-keeping  of  many  of  the 
public  companies,  and  the  fact  that  the  conduct  of 
a  public  plant,  especially  one  united  with  a  water 
plant,  does  not  require  the  keeping  of  accounts  in 
the  way  most  conducive  to  comparisons  with  other 
companies,  account  for  the  well-grounded  distrust 
of  most  lighting  statistics.  Professor  Commons, 
however,  in  a  previous  chapter,  has  succeeded  so 
admirably  that  there  is  encouragement  to  make 
further  efforts  to  gather  statistical  and  other  data. 

GROWTH   OF   MUNICIPAL   LIGHTING. 

In  a  pamphlet  published  in  1890  by  M.  J.  Fran- 
cisco, at  that  time  president  of  the  Rutland  Elec- 


LATEST  ELECTRIC  LIGHT  REPORTS.      187 

trical  Company  of  Rutland,  Vt.,  he  states,  "  I  have 
secured  reports  from  fifty  municipal  plants,  em- 
bracing nearly  all  of  the  cities  in  the  United 
States  owning  plants,  and  found  that  the  cost  of 
these  has  been  $1,511,225 ;  that  they  are  using 
3,725  lamps;" — i.e.,  arc  lamps,  as  the  context 
shows. 

An  exhaustive  examination  made  in  the  latter 
part  of  1892  by  a  student  of  the  University  of 
Wisconsin  revealed  192  public  plants. 

The  American  Electrical  Directory  for  the  first 
quarter  of  1898  (published  by  E.  L.  Powers,  Mo- 
nadnock  Building,  Chicago,  111.,  and  Havemeyer 
Building,  New  York  City)  gives  brief  informa- 
tion about  2,261  private  plants,  with  8229,938,605 
of  capital  stock,  264,428  arc  lights,  7,234,134 
incandescent  lights,  and  an  engine  horse-power, 
whether  steam,  or  water,  or  gas,  of  970,481.  The 
Directory  also  gives  figures  for  public  plants.  Cor- 
recting slightly  the  figures  of  the  Directory  rela- 
tive to  public  plants,  where  correspondence  with 
about  150  such  plants  has  revealed  errors,  but 
accepting  the  figures  of  the  Directory  in  over  half 
the  plants  mentioned,  we  reach  a  summary  of  353 
public  plants,  having  25,343  arc  lights,  354,031 
incandescent  lights,  and  59,500  horse-power  of  en- 
gines. One  question  in  a  letter  sent  to  many  public 
plants  was,  "What  other  public  lighting-plants 
are  there  within  a  hundred  miles  of  you?"      In 


188  MUNICIPAL  MONOPOLIES. 

replies,  the  names  of  over  fifty  plants  were  given 
which  are  not  quoted  in  this  chapter,  because  it 
was  found  that  a  few  cities  had  interpreted  the 
question  to  mean  simply  plants,  whether  public  or 
private,  that  did  street-lighting.  It  was  thought 
best,  therefore,  to  exclude  all  replies  on  this  head, 
lest  some  mistakes  might  creep  in;  but  there  is 
no  doubt  that  many  cities  thus  mentioned  do  own 
plants,  thus  raising  somewhat  the  above  number. 

We  then  find  that  the  public  plants  were  13.5 
per  cent  of  the  total  number,  and  had  8.7  per  cent 
of  the  total  arc  lights,  4.7  per  cent  of  the  total 
incandescent  lights,  and  5.8  per  cent  of  the  total 
horse-power. 

The  Directory  gives  the  present  estimated  popu- 
lation of  each  city  having  public  plants  ;  but  since 
these  are  largely  estimates,  the  accompanying  table 
gives  the  population  as  it  was  in  the  census  of 
1890.  In  the  cities  having  353  public  plants, 
there  was  a  population  at  that  time  of  2,947,420, 
or  4.8  per  cent  of  the  total  population  of  the  coun- 
try, including  Alaska,  in  1890,  but  of  course  a 
much  larger  percentage  of  the  population  living 
in  cities  and  villages  of  over  1,000  population. 
Table  No.  1  gives  the  location,  the  population  in 
1890,  the  number  of  arcs  and  incandescents,  and 
the  horse-power  of  the  engines  or  water-power  of 
these  353  plants,  as  reported  to  the  writer  or  to  the 
above  Directory. 


LATEST  ELECTRIC  LIGHT  REPORTS.      189 


TABLE  I. 

List  of  Municipal 

Plants. 

Alabama  — 

Popula- 
tion. 

No.  Ar, 
Lights. 

„    No.  Incan- 

<l>  --■-  mi 
Lights. 

Horse- 
Power  of 

Engines. 

Troy, 

3,449 

50 

600 

100 

Arkansas  — 

Hope, 

1,937 

300 

35 

Little  Rock, 

25,874 

212 

300 

California  — 

27,811 

212 

300 

335 

Alameda, 

11,165 

103 

2,216 

350 

Santa  Clara, 

2,891 

43 

60 

Colton, 

1,315 

12 

800 

Santa  Cruz, 

5,596 

84 

72 

Colorado  — 

20,967 

242 

3,016 

482 

Del  Norte, 

736 

15 

300 

80 

Connecticut  — 

South  Norwalk, 

4,875 

121 

2,000 

280 

Delaware  — 

Middletown, 

1,454 

2 

1,200 

100 

Mil  ford, 

1,226 

4 

1,600 

100 

Newark, 

214 

1,200 

100 

Smyrna, 

2,445 

_5 

900 

140 

Florida  — 

5,339 

11 

4,900 

440 

Fernandino, 

2,803 

20 

50 

Jacksonville, 

17,201 

238 

8,245 

630 

Georgia  — 

20,004 

258 

8,245 

680 

Cedartown, 

1,625 

35 

700 

100 

Dawson, 

2,284 

55 

850 

125 

Elberton, 

1,572 

61 

1,200 

100 

Gainesville, 

3,202 

50 

80 

Griffin, 

4,503 

52 

1,750 

150 

Madison, 

2,131 

50 

600 

Quitman, 

1,868 

24 

630 

75 

West  Point, 

1,254 

37 

885 

110 

Illinois  — 

18,439 

364 

6,615 

740 

Aurora, 

19,688 

206 

200 

Benton, 

908 

14 

700 

75 

190 


MUNICIPAL  MONOPOLIES. 


Illinois  {continued)  — 
Bloomington, 
Blue  Island, 
City  of  Chicago, 
Lincoln  Park,  Chicago, 
South  Park, 
West  Chicago  Park       ] 
Commission,  Chicago,   j 
Coal  City, 
Decatur, 
El  Dorado, 
Elgin, 

Farmer  City, 
Geneva, 
Harlem, 
Harvard, 
Jacksonville, 
La  Salle, 
McLeanshoro, 
Marengo, 
Marseilles, 
Mattoon, 
Metropolis, 
Milstadt, 
Mt.  Olive, 
Morgan  Park, 
Newton, 
Paris, 
Peru, 
Pittsfield, 
Rochelle, 
Rock  Falls, 
St.  Charles, 
Sandwich, 
Staunton. 
Venice, 

Indiana  — 

Anderson, 

Bluffton, 

Columbus, 


Popula- 
tion. 

20,484 

3,329 

1,099,850 

1,099,850 

1,099,850 

1,099,850 

1,672 
16,841 

1,500 
17,823 

1,367 

1,692 

1,967 
12,935 
9,855 
1,355 
1,445 
2,210 
6,833 
3,573 
1,186 
1,986 
1,027 
1,428 
4,996 
5,550 
2,295 
1,789 
1,900 
1,690 
2,516 
2,209 
932 
1,253,332 

.10,741 
3,589 
6,719 


.\".  Arc 
Lights. 

307 

72 

1,321 

243 

490 

900 

32 

156 

17 

156 

55 
80 
27 

145 
98 
39 
26 
20 

105 
37 
36 
40 
50 

100 
83 

30 
60 
30 

64 

34 

85 

5,158 


75 

82 


No.  Tncan- 
desa  at 
Lights. 


2,200 
1,030 

1,200 
800 

244 

1,400 
600 

40 


700 
750 


700 
300 
750 


3,500 
2,000 
1,500 
1,200 

600 
1,800 

550 

22,564 


Horse- 
Powt  r  of 

Engines. 

350 
300 
1,500 
420 
480 

1,300 

100 
150 

80 
125 

80 
170 
100 

50 
115 
125 
125 
100 

125 
100 

80 
125 

50 

150 
175 
300 
150 
100 
200 
110 
100 
100 
7,810 


100 
80 


LATEST  ELECT JUC  LIGHT  BEPORTS.      191 


Indiana  {continued )  — 

Popular 

turn. 

fro.  Arc 
Lights. 

Ab.  Incan- 
descent 

Lights. 

fforse- 
Power  of 
Engines. 

Crawfordsville, 

6,089 

145 

2,650 

750 

Gooclland, 

15,000 

23 

1,100 

100 

Goshen, 

6,033 

165 

.     . 

350 

Huntington, 

7,328 

60 

75 

Kendallville, 

2,060 

60 

125 

Logansport, 

13,328 

202 

10,000 

1,115 

Madison, 

8,936 

86 

125 

Marion, 

8,769 

118 

300 

Martinsville, 

2,680 

Muncie, 

11,315 

147 

175 

Nappanee, 

1,493 

27 

800 

100 

New  Castle, 

2,697 

61 

1,000 

150 

Oxford, 

808. 

20 

500 

75 

Portland, 

3,725 

52 

rent. 

Rushville, 

3,475 

52 

1,500 

200 

Vevay, 

1,663 
103,267 

28 
M03 

600 

90 

18,150 

3^910 

Iowa  — 

Afton, 

1,045 

325 

35 

Alta, 

768 

600 

70 

Ames, 

1,276 

17 

1,231 

150 

Bellevue, 

1,394 

13 

100 

Bloomfield, 

1,913 

2,200 

175 

Chariton, 

3,122 

1,700 

200 

Clarion, 

744 

700 

60 

Estherville, 

1,475 

15 

1,200 

100 

Fairfield, 

3,391 

19 

25 

Greenfield, 

1,048 

.     . 

700 

60 

Harlen, 

1,765 

1,200 

100 

Hawarden, 

744 

1,800 

80 

Independence, 

3,163 

6 

5,000 

300 

Indianola, 

2,254 

1,200 

125 

Keokuk, 

14,101 

Leon, 

1,422 

650 

200 

Lishon, 

1,079 

19 

700 

75 

Lyons, 

5,799 

57 

120 

Marshalltown, 

8,914 

*  98 

80 

Newton, 

2,564 

4 

3,500 

250 

Stuart, 

2,052 

1,750 

100 

Vinton, 

2,865 

9 

1,200 

150 

192  MUNICIPAL  MONOPOLIES. 

Pomila-         No  Arr     *'°-  Inca'>-       Horse- 

t  /  ,x  ion  rin/,,  deseent  Power  of 

IOWA  (continued) —  "°"-  Wits.        Lights.  Engines. 

Wilton  Junction,  1,212         500         .     .  65 

Winterset,  2,281  40       1,600         100 


Kansas  — 

66,391 

797 

27,256 

2,720 

Council  Grove, 

2,211 

12 

63 

. 

Garnett, 

2,238 

480 

,     . 

Hiawatha, 

2,486 

30 

. 

40 

Topeka, 

31,007 

264 

225 

Kentucky  — 

37,942 

306 

543 

265 

Bardstown, 

1,524 

25 

, 

.     , 

Bowling  Green, 

7,803 

80 

.     . 

100 

Henderson, 

8,835 

163 

Hickman, 

1,652 

20 

500 

80 

Paducah, 
Louisiana  — 

12,797 
32,611 

120 
408 

"500 

175 
355 

Alexandria, 

2,861 

8 

2,000 

200 

Maine  — 

Bangor, 

19,103 

156 

.     . 

. 

Lewiston, 

21,701 

130 

225 

Kennebunk, 

3,172 

43,976  286  .     .  225 
Maryland  — 

Frederick,  8,193  76  85 

Massachusetts  — 

Braintree,  5,311  92  4,364  225 

Danvers,  8,181  88  1,675  220 

Chicopee,  16,420  132  2,548  350 

Hingkam,  4,819  0  3,594  .     . 

Hudson,  5,308  17  284  60 

Hull,  1,044  2  3,943  495 

Marblehead,  7,671  164  2,972  400 

Middleborough,  6,689  119  1,899  150 

Needham,  3,511  .    .  310 

North  Attleborouglr;  6,576  3  3,075  350 

Peabody,  10,507  161  3,508  400 

Reading,  4,717  125  2,594  300 

Taunton,  27,115  224  4,673  665 


LATEST  ELECTRIC  LIGHT  REPORTS.      193 


Popula- 

No.  Arc 

No.  Incan- 
descent 

Horse- 
Power  of 

Massachusetts  (continued) —  t,on- 

Lights. 

Lights. 

Engines. 

Wakefield, 

3,304 

144 

2,300 

250 

Wellesley  Hills, 

4,229 
115,402 

504 
38,243 

1,271 

3,865 

Michigan  — 

Bay  City, 

27,839 

220 

425 

Chesaning, 

1,056 

23 

700 

.     • 

Crystal  Falls, 

1,500 

900 

Clinton, 

960 

37 

540 

Cold  Water, 

2,247 

101 

3,600 

240 

Detroit, 

205,876 

1,820 

3,901 

1,700 

Dowagiac, 

2,806 

40 

124 

Durand, 

255 

22 

1,600 

100 

East  Tawas, 

2,226 

26 

400 

Escanaba, 

6,808 

60 

1,000 

250 

Evart, 

1,269 

16 

900 

80 

Fremont, 

1,097 

30 

1,350 

.     . 

Flushing, 

965 

abt.  20  abt.1,000 

Grand  Ledge, 

1,606 

26 

1,200 

100 

Grand  Haven, 

5,023 

75 

1,300 

150 

Hart, 

12,000 

20 

450 

100 

Hillsdale, 

3,915 

58 

1,713 

200 

Holland, 

3,945 

59 

3,620 

275 

Kalamazoo, 

17,853 

200 

300 

Lansing, 

13,102 

250 

4,600 

400 

Lowell, 

1,829 

52 

1,035 

200 

Marlette, 

1,050 

3 

400 

150 

Marquette, 

9,093 

101 

2,200 

300 

Marshall, 

3,968 

116 

1,500 

330 

Mason, 

1,875 

42 

450 

100 

Niles, 

4,197 

98 

2,008 

500 

Ontonagon, 

1,250 

8 

885 

Ovid, 

1,423 

25 

1,000 

100 

Oxford, 

1,128 

35 

1,600 

125 

Paw  Paw, 

1,391 

56 

1,400 

128 

Portland, 

1,678 

34. 

1,200 

175 

St.  Clair, 

2,353 

12 

400 

150 

St.  Ignace, 

2,704 

51 

St.  Johns, 

3,127 

50 

1,500 

200 

Shelby, 

994 

14 

450 

65 

South  Haven, 

1,924 

25 

1,200 

150 

194 


MUNICIPAL  MONOPOLIES. 


Michigan  (continued)  — 

Popula- 
tion. 

Jfb.  Arc 

Li'jhts. 

Nit.  Tnran-       Horse- 
descent       Power  of 
Liijhts.         Engines. 

Staunton, 

1,352 

19 

778 

75 

Thompsonville, 

7 

200 

Three  Oaks 

885 

12 

232 

50 

Union  City, 

1,156 

.     . 

1,200 

60 

Vieksburg, 

921 

23 

250 

Ypsilanti, 

6,129 
351,532 

88 

3,964 

48,786 

7,178 

Minnesota  — 

Adrian, 

671 

16 

600 

80 

Atkin, 

737 

15 

800 

80 

Alexandria, 

2,118 

11 

1,000 

90 

Arlington, 

417 

4 

200 

(  power 
(  rented. 

Blue  Earth  City, 

1,569 

27 

1,000 

100 

Brainerd, 

5,703 

34 

2,500 

350 

Delano, 

889 

Ely, 

901 

37 

700 

125 

Fulda, 

348 

600 

Granite  Falls, 

800 

21 

800 

70 

Henderson, 

909 

13 

500 

60 

Lake  City, 

2,128 

62 

1,200 

123 

Litchfield, 

1,899 

32 

950 

90 

Long  Prairie, 

680 

Luverne, 

1,466 

32 

2,700 

250 

Marshall, 

1,203 

55 

1,700 

100 

Moorhead, 

2,008 

,     , 

Preston, 

910 

6 

1,200 

100 

Rochester, 

5,321 

127 

1,600 

250 

St.  James, 

939 

6 

3,000 

100 

St.  Peter, 

3,671 

45 

700 

125 

Sleepy  Eye, 

1,513 

65 

74 

Springfield, 

716 

42 

54 

100 

Tracy, 

1,400 

35 

1,000 

120 

Waseca, 

2,482 

80 

1,000 

175 

Wilmar, 

1,825 

13 

1,040 

140 

43,303 

778 

24,834 

2,704 

Mississippi  — 

Aberdeen, 

3,449 

Canton, 

2,131 

35 

1,800 

330 

5,580 

35 

1,800 

330 

LATEST  ELECTRIC  LIGHT  REPORTS.      195 


Missouri  — 

Popula- 
tion. 

i\<i.  A  re 
Lights. 

No.  Incan- 
descent 
Litjhts. 

Horse- 
Power  of 
Engines. 

Albany, 

1,334 

30 

2,100 

120 

Bethany, 

1,105 

23 

1,000 

150 

Brunswick, 

1,748 

20 

450 

60 

Cameron, 

2,917 

30 

1,200 

150 

Fayette, 

2,247 

50 

600 

100 

Fulton, 

4,314 

15 

2,000 

160 

Hannibal, 

12,857 

87 

4,448 

300 

Harrisonville, 

1,645 

38 

750 

Higginsville, 

2,342 

40 

700 

100 

Holden, 

2,520 

35 

500 

100 

Macon, 

3,371 

50 

1,200 

150 

Pierce  City, 

2,511 

58 

650 

90 

Princeton, 

1,410 

Rockport, 

934 

.     . 

700 

125 

St.  Charles, 

6,161 

82 

200 

St.  Joseph, 

52,324 

355 

450 

Salisbury, 

1,672 

40 

720 

150 

Savannah, 

1,288 

30 

1,200 

100 

Shelbina, 

1,691 

700 

50 

Slater, 

2,400 

50 

500 

80 

Montana  — 

106,791 

1,033 

19,418 

2,635 

Miles  City, 

956 

64 

1,550 

175 

Nebraska — 

Crete, 

2,310 

50 

45 

Falls  City, 

2,102 

900 

60 

Fremont, 

6,747 

72 

Lexington, 

1,392 

500 

50 

Pawnee  City, 

1,550 

26 

1,000 

100 

Schuyler, 

2,160 

18 

700 

120 

Tecumseh, 

1,654 

520 

50 

New  Hampshire  — 

17,915 

166 

3,620 

425 

Wolfboro, 

3,020 

1,039 

65 

New  Jersey  — 

Atlantic  Highlands, 

945 

68 

1,000 

150 

Madison, 

2,469 

3,914 

330 

Ocean  Grove, 

2,754 

120 

3,080 

900 

6,168 

188 

7,994 

1,380 

196 


MUNICIPAL  MONOPOLIES. 


Popula- 
tion. 

No.  A  re 

Lights. 

N6,  Incan- 
descent 
Lights. 

Horse- 
Power  of 
Engines. 

7,221 

103 

300 

125 

9,416 

75 

100 

3,399 

50 

70 

4,463 

55 

1,200 

335 

1,744 

50 

2,500 

300 

3,150 

100 

100 

16,038 

283 

1,600 

750 

1,164 

28 

700 

100 

1,883 

36 

850 

225 

498 

17 

500 

80 

15,000 

115 

125 

1,983 

78 

700 

210 

12,967 
78,926 

113 
1,103 

200 
8,550 

125 
2,645 

5,000 

38 

300 

72 

1,726 

35 

507 

80 

2,969 

36 

250 

65 

2,318 

30 

300 

70 

2,126 
11,318 

42 
181 

2,000 
3,357 

125 
412 

8,338 

94 

4,500 

650 

3,068 

85 

1,800 

250 

2,257 

45 

80 

2,327 

51 

750 

125 

1,112 

40 

750 

100 

3,241 

50 

1,000 

160 

2,614 

56 

850 

100 

1,076 

30 

1,300 

125 

6,326 

128 

1,000 

300 

1,366 

40 

60 

2,460 

67 

1,950 

265 

881 

25 

400 

125 

17,565 

209 

3,828 

910 

1,498 

20 

4,320 

52 

1,200 

200 

1,291 

New  York  — 
Batavia, 
Dunkirk, 
Fredonia, 
Green  Island, 
Hamilton, 
Herkimer, 
Jamestown, 
Mayville, 
Springville, 
Tully, 

Watervleit,1 
Westfield, 
West  Troy, 

North  Carolina  — 
High  Point, 
Kinston, 
Reidsville, 
Statesville, 
Wilson, 

Ohio  — 
Ashtabula, 
Bryan, 
Carthage, 
Clyde, 
Columbiana, 
Conneaut, 
Cuyahoga  Falls, 
DeGraff, 
Galion, 
Granville, 
Greenfield, 
Greenwich, 
Hamilton, 
Hubbard, 
Jackson,      • 
Linwood, 

1  Present  population  estimated  by  American  Electrical  Direc- 
tory, 


LATEST  ELECTRIC  LIGHT  REPORTS.       197 


Ohio  (continued)  — 

Po/iuhi- 
tion. 

Nb.Arc 

Lights. 

So.  Incan- 
descent 

Lights. 

Horse- 
Power  of 

Engines. 

London, 

3,313 

73 

1,200 

160 

Loudonville, 

1,444 

42 

750 

150 

Lynchburg, 

763 

32 

500 

65 

Madisonville, 

2,214 

80 

1,500 

150 

Marietta, 

8,273 

112 

300 

150 

Martins  Ferry, 

8,273 

100 

1,000 

300 

Miarnisburg, 

2,952 

50 

1,400 

200 

Minerva, 

1,139 

50 

Montpelier, 

2,200 

42 

1,200 

125 

Mt.  Sterling, 

752 

27 

900 

75 

Newark, 

14,270 

250 

226 

Niles, 

4,289 

115 

80 

Norwood, 

845 

162 

1,150 

200 

Oxford, 

1,922 

43 

2,700 

135 

Painesville, 

4,755 

90 

150 

Plain  City, 

1,245 

32 

750 

150 

Portsmouth, 

12,394 

St.  Bernard, 

1,779 

80 

575 

200 

St.  Clairesville, 

1,191 

30 

500 

150 

Shelby, 

1,977 

07 

1,527 

305 

Troy, 

4,494 

108 

1,500 

300 

TVapakoneta, 

3,616 

79 

1,000 

180 

Wellston, 

4,377 

"Willoughby, 

1,219 

29 

900 

75 

"Wilmington, 

3,079 

115 

1,200 

200 

Woodville, 

622 

21 

600 

153,137 

2,821 

40,480 

7,176 

Oregon  — 

McMinnville, 

1,368 

.     . 

600 

80 

Scio, 

616 

175 

25 

1,984 

775 

105 

Pennsylvania — 

Allegheny, 

105,287 

1,146 

5,373 

1,850 

Chambersburg, 

7,836 

167 

1,650 

450 

Council-Grove, 

16 

90 

Easton,- 

14,481 

146 

400 

Emaus, 

883 

40 

Meadville, 

9,520 

72 

Middletown, 

5,080 

60 

120 

300 

North  East, 

1,538 

30 

50 

198 


MUNICIPAL  MONOPOLIES. 


Pennsylvania  (continued) 

Popula. 
Hon. 

No.  Arc 
Lights. 

Xo.  Jnran- 
<i<  set  n t 
I.  ii/li  to. 

Horse- 

I'mri  i-  of 

Engines. 

Quakertovvii, 

2,169 

42 

3,000 

240 

St.  Clair, 

3,680 

33 

1,982 

340 

Schuylkill  Haven, 

3,088 

42 

600 

100 

Sharpsburg, 

4,898 

47 

1,300 

180 

Shickshinny, 

1,448 

22 

400 

80 

Tarentum, 

4,627 

70 

1,400 

125 

Titusville, 

8,073 

100 

68 

Weatherly, 

2,961 

West  Newton, 

2,285 

32 

1,000 

177,854 

2,025 

16,915 

4,223 

South  Dakota — 

Madison, 

1,736 

7 

800 

80 

Tennessee  — 

Dayton, 

2,719 

475 

100 

Harriman, 

716 

55 

75 

Lebanon, 

1,883 

18 

300 

McMinnville, 

1,677 

45 

825 

Morristown 

1,999 

30 

390 

50 

Paris, 

1,917 

28 

1,000 

125 

Union  City, 

3,441 

450 

80 

14,352 

176 

3,440 

430 

Texas  — 

Ft.  Worth, 

23,076 

68 

402 

160 

Galveston, 

29,084 

300 

600 

400 

Greenville, 

4,330 

35 

1,750 

225 

Halletsville, 

1,011 

700 

85 

Honey  Grove, 

1,828 

40 

910 

100 

Sherman, 

7,395 

54 

.     • 

300 

66,724 

497 

4,362 

1,270 

Utah  — 

Logan, 

4,565 

13 

50 

.     . 

Payson, 

2,135 

500 

120 

6,700 

"l3 

550 

120 

Vermont — 

Barton, 

2,217 

.     . 

2,000 

500 

Highgate, 

1,853 

1.200 

Johnson, 

1,462 

1,000 

150 

Lyndonville, 

606 

34 

4,000 

800 

Morrisville, 

1,300 

21 

2,000 

LATEST  ELECTRIC  LIGHT  REPORTS.       199 


Vermont  (continued )  — 

Popula- 
tion. 

No.  Arc 

Lights. 

No.  Incan- 
descent 

Lights. 

florst- 
Poiver  of 
Engines. 

Northfield, 

2,000 

1,500 

400 

S  wanton, 

2,628 

25 

3,500 

500 

"Wells  River, 

526 

800 

150 

11,814 

~80 

16,000 

2,500 

Virginia  — 

Alexandria, 

14,339 

97 

.     . 

80 

Danville, 

10,305 

140 

30 

Farmville, 

2,404 

24 

263 

100 

Franklin, 

875 

300 

30 

Salem, 

3,279 

50 

600 

100 

South  Boston, 

1,789 

11 

.     . 

35 

Staunton, 

6,975 
39,966 

100 
422 

1,163 

100 
475 

Washington  — 

Chehalis, 

1,309 

30 

700 

120 

Ellensburg, 

2,769 

41 

850 

250 

Port  Angeles, 

316 

400 

65 

Sprague, 

1,689 

26 

500 

75 

Tacoma, 

36,006 

485 

7,000 

1,000 

Waterville, 

293 

350 

45 

42,382 

582 

9,800 

1,555 

West  Virginia  — 

Wheeling, 

34,522 

468 

•     • 

500 

"Wisconsin  — 
Bayfield, 

1,373 

650 

125 

Mazomanie, 

1,034 

300 

60 

Reedsburg, 

1,738 

30 

2,500 

160 

4,145 

30 

3,450 

345 

Of  the  350  cities,  Chicago  had  1,099,850  popula- 
tion in  1890,  and  now  has  four  public  arc  plants,  — 
one  owned  by  the  city  of  Chicago,  with  three  large 
central  stations  ;  one  by  the  West  Park  Board ; 
another  by  the  Lincoln  Park  Board;  and  the. best 
managed  of  all,  that  of  the  South  Park  Board. 
Detroit  had  205,876  population  in  1890 ;  Allegheny 


200  MUNICIPAL  MONOPOLIES. 

had  105,287;  St.  Joseph,  Mo.,  52,324.  There  were 
52  other  cities  having  a  population  of  over  8,000, 
the  largest,  Tacoma,  Wash.,  having  36,006.  Of 
the  remaining  294  cities  of  less  than  8,000  popula- 
tion, 151  had  under  2,000,  and  46  had  under  1,000. 

To  specify  in  more  detail,  4  cities  had  over  50,000 
population ;  52  had  between  8,000  and  36,000  ; 
28  had  between  5,000  and  8,000  ;  50  had  between 
3,000  and  5,000  ;  62  had  between  2,000  and  3,000  ; 
108  had  between  1,000  and  2,000  ;  and  46  had 
less  than  1,000  population. 

Over  one-half  of  these  cities  did  not  have  plants 
in  1890  ;  and  nearly  all  have  a  larger  population 
now,  and  many  places  are  much  larger. 

The  location  of  these  plants  is  very  interesting. 
New  England  has  28,  of  which  Massachusetts  has 
15  and  Vermont  8  plants.  There  are  only  80 
plants  west  of  Iowa  and  south  of  Ohio  and  Penn- 
sylvania. Of  these,  42  are  in  six  States  :  Virginia, 
Tennessee,  Nebraska,  and  Washington  have  7 
plants  each,  Georgia  8,  and  Texas  6.  The  re- 
maining 244  are  between  the  Hudson  and  Mis- 
souri Rivers.  Michigan  and  Ohio  lead,  with  42 
plants  each  ;  then  follow  Illinois  with  36,  Minne- 
sota with  26,  Iowa  with  24,  Missouri  with  20,  In- 
diana with  19,  and  Pennsylvania  with  17.  These 
eight  States  have  226  plants. 

It  is  very  interesting  to  notice  that  the  States 
where  there  have  appeared  the  most  radical  popu- 


LATEST  ELECTRIC  LIGHT  REPORTS.       201 

listic  platforms  in  favor  of  government  ownership 
of  public  utilities,  such  as  the  States  of  the  far 
West  and  South,  have  little  to  show  as  yet  of  mu- 
nicipal ownership  of  lighting-plants  in  comparison 
with  the  rest  of  the  country ;  and  the  same  is  true 
with  respect  to  water-works.  Of  course  the  ab- 
sence of  large  cities,  and  the  predominantly  agri- 
cultural character  of  most  of  the  South  and  West, 
leading  to  a  greater  interest  in  questions  of  money 
and  transportation  than  of  city  monopoly,  account 
for  this  in  large  part. 

There  are  no  public  plants,  apparently,  in  Rhode 
Island,  South  Carolina,  North  Dakota,  Idaho,  Wy- 
oming, Arizona,  and  New  Mexico,  and  only  one 
each  in  New  Hampshire,  Connecticut,  Maryland, 
West  Virginia,  Alabama,  Louisiana,  Colorado, 
South  Dakota,  and  Montana,  and  two  each  in 
Florida,  Mississippi,  Arkansas,  Utah,  and  Oregon. 
There  are  three  each  in  Maine,  New  Jersey,  and 
Wisconsin. 

In  point  of  population  in  cities  having  public 
ownership,  Illinois  leads,  with  1,253,332  in  1890 ; 
Michigan  is  second,  with  346,500  population  in 
such  cities ;  Pennsylvania  third,  with  177,854 ; 
Ohio  fourth,  with  153,137 ;  and  Massachusetts 
fifth,  with  115,402. 

In  respect  to  the  number  of  arc  lights,  Illinois 
leads  again,  with  5,158  lights  provided  by  her 
public  plants ;  Michigan  second,  with  3,964  ;   Ohio 


202 


MUNICIPAL  MONOPOLIES. 


third,  with  2,821 ;  Pennsylvania  fourth,  with 
2,025  ;  and  Indiana  fifth,  with  1,403  arc  lights.  In 
the  matter  of  incandescents,  Michigan  leads,  with 
48,786  such  lights ;  Ohio  is  second,  with  40,480  ; 
Massachusetts  third,  with  38,243 ;  Iowa  fourth, 
with  27,256;  and  Minnesota  fifth,  with  24,844. 
In  the  matter  of  horse-power,  of  either  engine  or 
water-power,  Illinois  leads  again,  with  7,810  horse- 
power; Michigan  is  a  close  second,  with  7,178; 
Ohio  third,  with  7,376  ;  Pennsylvania  fourth,  with 
4,223  ;  and  Indiana  fifth,  with  3,910. 

These  facts  are  presented  in  the  accompanying 
Table  No.  II. 


TABLE  II. 

Summaries  by  States. 

States, 

No. 

Plants. 

Populations. 

No. 

Arcs. 

No.  Incan- 
descents. 

Horse- 
power. 

Alabama, 

1 

3,449 

50 

600 

100 

Arkansas, 

2 

27,811 

212 

300 

335 

California, 

4 

20,967 

242 

3,016 

482 

Colorado, 

1 

736 

15 

300 

80 

Connecticut, 

1 

4,875 

121 

2,000 

280 

Delaware, 

4 

5,339 

11 

4,900 

440 

Florida, 

2 

20,004 

258 

8,245 

680 

Georgia, 

8 

18,439 

364 

6,615 

740 

Illinois, 

36 

1,253,332 

5,158 

22,564 

7,810 

Indiana, 

19 

103,21 ;; 

1,403 

18,150 

3,910 

Iowa, 

24 

60,391 

797 

27,256 

2,720 

Kansas, 

4 

37,942 

106 

543 

265 

Kentucky, 

5 

32,611 

408 

500 

355 

Louisiana, 

1 

2,861 

8 

2,000 

200 

Maine, 

3 

43,976 

286 

225 

Maryland, 

1 

8,193 

76 

85 

Massachusetts, 

15 

115,402 

1.271 

38,243 

3,865 

Michigan, 

42 

351,532 

3,964 

48,786 

7,178 

Minnesota, 

26 

43,303 

778 

24,844 

2,704 

LATEST  ELECTRIC  LIGHT  REPORTS. 


203 


States. 

No. 

Plants. 

Populations. 

No. 
Arcs. 

No.  Incan- 
descents. 

Horse- 
Power. 

Mississippi, 

2 

5,580 

35 

1,800 

330 

Missouri, 

20 

106,791 

1,033 

19,418 

2,635 

Montana, 

1 

1,95(5 

64 

1,550 

175 

Nebraska, 

7 

17,915 

166 

3,620 

425 

New  Hampshire, 

1 

3,020 

1,039 

65 

New  Jersey, 

3 

6,168 

188 

7,994 

1,380 

New  York, 

13 

78,926 

1,103 

8,550 

2,645 

North  Carolina, 

5 

11,318 

181 

3,357 

412 

Ohio, 

42 

153,137 

2,821 

40,480 

7,376 

Oregon, 

2 

1,984 

775 

105 

Pennsylvania, 

17 

177,854 

2,025 

16,915 

4,223 

South  Dakota, 

1 

1,736 

7 

800 

80 

Tennessee, 

7 

14,352 

176 

3,440 

430 

Texas, 

6 

66,724 

497 

4,362 

1,270 

Utah, 

2 

6,700 

13 

550 

120 

Vermont, 

8 

11,814 

80 

16,000 

2,500 

Virginia, 

7 

39,966 

422 

1,163 

475 

Washington, 

6 

42,382 

582 

9,800 

1,555 

"West  Virginia, 

1 

34,522 

468 

.     . 

500 

Wisconsin, 

3 

4,145 

30 

3,450 

345 

No.  of  States,  39. 

353 

2,947,420 

25,343 

354,031 

59,500 

AGE   OF   MUNICIPAL  PLANTS. 

From  letters  to  the  writer,  and  from  Professor 
Parsons's  tables' in  the  Arena  for  September,  1895, 
it  is  possible  to  give  in  Table  III.  the  date  of 
beginning  of  city  ownership  in  144  electric-light 
plants. 

Most  of  the  approximately  200  remaining  plants 
given  in  another  table  have  begun  city  ownership 
since  1892.  Some  errors  may  have  crept  into  the 
table  here  given,  but  it  is  substantially  correct. 

It  will  be  noticed  that  the  oldest  plant  is  Fair- 
field, la.,  built  in  1882,  and  devoted  exclusively  to 


204 


MUNICIPAL   MONOPOLIES. 


street-lighting,  with  only  19  arcs.  Next  come 
Meadville,  Pa.,  and  Santa  Cruz,  Cal.,  in  1883  ; 
and  there  is  at  least  one  Canadian  plant  of  the 
same  year,  that  of  Orella,  Ont.  Meadville  does  no 
commercial  lighting,  having  72  street  arcs;  and 
Santa  Cruz  confines  itself  to  84  street  arcs. 

In  1885  public  plants  were  built  in  Danville, 
Va.,  which  does  commercial  as  well  as  public  light- 
ing, and  in  Huntington,  Ind.,  which  now  has  60 
street  arcs. 

The  fact  that  more  cities  in  this  table,  viz.,  25, 
are  reported  as  entering  upon  city  ownership  in 
1892  than  in  any  other  year,  really  implies  noth- 
ing as  to  the  rapidity  of  increase  of  municipal 
ownership,  since  most  of  the  nearly  200  plants 
omitted  are  probably  less  than  six  years  old. 


TABLE  III.       Age  of  143  Public  Plants. 

1882. 

Easton,  Pa. 

Fairfield,  Iat 

Grand  Ledge,  Mich 
Hannibal,  Mo. 

1883. 

Portsmouth,  0. 

Meadville,  Pa. 

1887. 

Santa  Cruz,  Cal. 

Alameda,  Cal. 

Aurora,  111. 

1885. 
Danville,  Va. 
Huntington,  Ind. 

Bay  City,  Mich. 
Brainerd,  Minn. 
Chicago,  111. 

Council  Grove,  Pa. 

1886. 

Lewiston,  Me. 

Crete,  Neb. 

Marshalltown,  la. 

Decatur,  111. 

Paris,  111. 

LATEST  ELECTRIC  LIGHT  REPORTS.        205 


Bowling  Green,  Ky. 
Council  Grove,  Kan. 
Dunkirk,  N.Y. 
Frederick,  Md. 
Gainesville,  Ga. 
Galion,  O. 
Jackson,  O. 
Leon, la. 
Lewiston,  Me. 
Painesville,  O. 
Sherman,  Tex. 
Ypsilanti,  Mich. 

1889. 
Bangor,  Me. 
Bloomington,  111. 
Chamhershurg,  Pa. 
Chariton,  la. 
Danvers,  Mass. 
Galveston,  Tex. 
Goshen,  Ind. 
Litchfield,  Minn. 
Little  Rock,  Ark. 
Marietta,  O. 
Marquette,  Mich. 
Oxford,  O. 
Sharpsburg,  Pa. 
Titusville,  Pa. 
Topeka,  Kan. 
West  Troy,  N.Y. 

1890. 
Alexandria,  Minn. 
Allegheny,  Pa. 
Elgin,  111. 
Einaus,  Pa. 
Fredonia,  N.Y. 
Indianola,  la. 
La  Salle,  111. 
McMinnville,  Or. 
Middletown,  Pa. 


Newton,  la. 
St.  Charles,  Mo. 
Shelby,  O. 
Troy,  Ala. 

1891. 
Albany,  Mo. 
Cameron,  Mo. 
Cold  Water,  Mich. 
Crawfordsville,  Ind. 
Ft.  Worth,  Tex. 
Herkimer,  N.Y. 
Madison,  Ga. 
Madison,  N.J. 
Miamisburg,  O. 
St.  Clairsville,  O. 
Shelbina,  Mo. 
South  Norwalk,  Conn. 
Tracy,  Minn. 

1892. 
Ashtabula,  O. 
Braintree,  Mass. 
Carthage,  O. 
Chehalis,  Wash. 
Jamestown,  N.Y. 
Lansing,  Mich. 
Loudonville,  O. 
Marion,  Ind. 
Marseilles,  111. 
Metropolis,  111. 
Peabody,  Mass. 
Pierce  City,  Mo. 
Quakertown,  Pa. 
Rockport,  Mo. 
St.  Charles,  111. 
St.  Peter,  Minn. 
Salisbury,  Mo. 
Savannah,  Mo. 
Schuyler,  Neb. 
South  Park,  Chicago. 
Swanton,  Vt. 


206 


MUNICIPAL  MONOPOLIES. 


"Wellesley,  Mass. 
Wellston,  O. 
Westfield,  N.Y. 
Wheeling,  W.  Va. 

1893. 
Batavia,  N.Y. 
Clyde,  O. 
Coal  City,  111. 
DeGraff,  O. 
Fayette,  Mo. 
High  Point,  N.C. 
Holland,  Mich. 
Kendallville,  Ind. 
Marshall,  Mich. 
Middleborough,  Mass. 
Needham,  Mass. 
Newcastle,  Ind. 
St.  Claire,  Mich. 
Salem,  Va. 
Tacoma,  Wash. 

1894. 
Higginsville,  Mo. 
Hillsdale,  Mich. 
Hull,  Mass. 
Logansport,  Ind. 
Newark,  O. 
Niles,  Mich. 


N.  Attlehorough,  Mass. 
Wakefield,  Mass. 
Waseca,  Minn. 

1895. 
Detroit,  Mich. 
Fremont,  Neb. 
Hamilton,  O. 
Harrisonville,  Mo. 
Hingham,  Mass. 
Jacksonville,  Fla. 
Kalamazoo,  Mich. 
Marblehead,  Mass. 
Reading,  Mass. 
South  Haven,  Mich. 

1896. 
Ames,  Io. 

Atlantic  Highlands,  N.J. 
Chicopee,  Mass. 
Henderson,  Ky. 
London,  O. 
Miles  City,  Mont. 
Paducah,  Ky. 

1897. 
Harriman,  Tenn. 
Hudson,  Mass. 
Princeton,  111. 


DEPRECIATION. 

Mr.  Horatio  A.  Foster,  the  fairest  of  the  oppo- 
nents of  municipal  ownership,  is  now  ready  to  con- 
cede 5  per  cent  as  a  sufficient  allowance  for  interest 
in  the  case  of  city  plants,  but  still  insists  upon  7^ 
per  cent  for  depreciation.  (See  a  letter  from  him 
in  Electric  Engineering,  May  12,  1898.)     He  con- 


LATEST  ELECTRIC  LIGHT  REPORTS.        207 

cedes,  however,  that  private  plants  do  not  make 
such  allowance  any  more  than  do  public  plants. 
In  fact,  the  managers  of  private  plants  rarely  charge 
off  more  than  3  per  cent  for  depreciation,  and 
scarcely  refer  to  it  except  when  they  criticise  a 
public  plant  for  not  charging  off  7  per  cent  or 
10  per  cent  yearly. 

In  Massachusetts,  in  the  year  June  30,  1889- 
1890,  the  electric-light  plants  apparently  charged 
off  nothing  for  depreciation,  although  they  reported 
to  the  Massachusetts  Gas  and  Electric  Light  Com- 
mission net  earnings  of  $469,016.05  on  a  capital 
of  over  $6,000,000.  The  following  table,  No.  IV., 
gives  the  reported  assets  and  the  depreciation  in 
dollars  and  percentages  during  each  subsequent 
year : — 

TABLE  IV. 


Year. 

Assets. 

Depreciation. 

Per  cent,  of 
Depreciation. 

1890-1891 

$    9,931,887.66 

$      41,225.21 

.42 

1891-1892 

12,438,857.19 

210,168.78 

1.69 

1892-1893 

14,275,363.24 

214,729.89 

1.50 

1893-1894 

15,028,578.97 

151,388.66 

.99 

1894-1895 

15,620,073.00 

565,287.65 

3.62 

1895-1896 

15,892,336.86 

446,632.89 

2.80 

1896-1897 

17,147,749.23 

290,256.18 

1.62 

Totals  and  Averages. 

$100,331,846.15 

$1,919,689.26 

1.91 

It  will  be  observed  that  the  average  deprecia- 
tion or  percentage  of  the  sum  of  the  assets  for  the 
seven  years  borne  by  the  $1,119,689.26  charged  to 
depreciation  was  only  1.91  per  cent.     The  highest 


208  MUNICIPAL  MONOPOLIES. 

average  charge,  that  of  1894-1895,  was  3.62  per 
cent ;  and  the  average  of  the  next  two  years  was 
2.23  per  cent,  being  2.8  per  cent  in  1895-1896, 
and  1.62  per  cent  in  1896-1897.  During  the  latter 
year  there  were  83  private  plants  in  the  State. 

It  is  almost  certain  that  if  we  omit  the  value  of 
the  franchise  or  gift  of  the  people,  the  deprecia- 
tion of  the  tangible  assets  is  more  than  is  usually 
charged  off  by  private  companies.  The  latter,  act- 
ing on  the  principle  that  "  sufficient  unto  the  day 
is  the  evil  thereof,"  are  yearly  giving  to  their  stock- 
holders larger  returns  than  they  should  be  allowed 
to  do,  and  thereby  are  preparing  the  way  for  great 
losses  to  those  who  may  be  stockholders  at  the 
time,  rapidly  approaching,  when  public  purchase 
or  regulation  of  rates  shall  be  very  largely  based 
on  the  cost  of  duplication  of  the  physical  plant. 
The  table  just  presented,  however,  shows  how  ill 
it  becomes  the  managers  of  private  plants  to  charge 
public  plants  with  insufficient  allowance  for  de- 
preciation ;  but  disinterested  students  cannot,  of 
course,  be  content  with  such  a  dismissal  of  the 
problem. 

The  question  may  therefore  be  approached  from 
another  side.  The  city  of  Chicago  plant,  because 
of  the  construction  of  some  of  it  before  1890,  when 
depreciation  was  far  greater  than  now,  owing  to 
the  experimental  character  of  electric  lighting  at 
that  time,  and  probably  also  because  of  the  inef- 


LATEST  ELECTRIC  LIGHT  REPORTS.        209 

ficient  character  of  the  city  government,  has  ex- 
perienced a  heavier  depreciation  than  any  of  the 
other  plants  examined  by  the  writer  as  to  this 
point,  with  the  possible  exception  of  one  or  two 
small  plants,  subject  to  special  misfortune  by  fire. 
The  entire  cost  of  construction  of  the  1,321  arc 
lights  that  were  in  use  at  the  beginning  of  1898 
is  reported  by  the  chief  electrician,  Mr.  Edward  B. 
Ellicott,  as  $797,411.11,  or  $603.64  per  arc;  but 
Mr.  Ellicott  says  an  equally  efficient  plant  could 
be  duplicated  to-day  for  one-half  that.  To  write 
off  such  an  amount  of  depreciation  as  this  implies 
would  have  required  an  allowance  each  year,  from 
1887  until  January,  1893,  of  15  per  cent  yearly, 
and  of  7^  per  cent  subsequently  on  the  assets,  as 
they  stood  at  the  beginning  of  each  year,  after 
deducting  the  depreciation  and  adding  the  new 
construction  of  the  previous  year.  Such  a  depre- 
ciation is  computed  by  the  writer  in  later  tables 
when  referring  to  Chicago. 

Another  plant,  started  in  1887,  that  of  Aurora, 
111.,  was  still  more  closely  investigated.1  Its  tangi- 
ble assets  were  valued  by  two  different  electric 
light  experts  as  worth  about  $30,000,  or  about 
$150  for  each  of  its  206  arcs.  It  was  further 
found  that  an  allowance  of  10  per  cent  yearly  of 

1  The  writer  was  aided  in  the  study  of  this  plant  hy  Mr. 
Henry  L.  Schoolcraft,  a  Fellow  in  History  at  the  University  of 
Chicago,  who  spent  some  time  in  Aurora  in  careful  study  of  the 
plant. 


210  MUNICIPAL  MONOPOLIES. 

depreciation,  prior  to  1894,  and  of  5  per  cent  since 
then,  would  reduce  the  amount  paid  for  the  plant 
at  different  times  to  this  amount. 

A  special  investigation  of  a  third  plant,  likewise 
established  in  1887,  that  of  Topeka,  Kan.,  was 
also  made  on  the  ground.1  The  dynamos  of  the 
Topeka  plant  were  replaced  in  1896  by  better  dy- 
namos. The  present  value  of  the  tangible  assets, 
according  to  the  superintendent  and  to  a  well- 
known  electrical  engineer,  could  be  duplicated  for 
about  $1:5,000,  or  about  $174  per  arc.  A  depreci- 
ation of  5  per  cent  yearly  upon  all  the  cost  of  con- 
struction is  sufficient  to  cover  all  the  loss  in  value 
up  to  date. 

We  next  come  to  a  plant  built  since  1893,  under 
modern  conditions,  —  the  Detroit,  Mich.,  plant. 
AW'  have  here,  as  a  guide,  the  estimates  of  the 
builder  of  the  plant,  who  was  for  a  time  its  man- 
ager, and  is  now  the  manager  of  a  large  private 
plant  at  Detroit,  Mr.  Alex  Dow,  a  man  of  wide 
experience  in  such  matters,  and  the  ablest  and 
most  fair-minded  electrician  in  private  employ  that 
the  writer  has  met  in  this  investigation.  From  an 
article  in  The  Western  Electrician  (Chicago,  Feb. 
22,  1896),  and  in  letters  to  the  writer,  Mr.  Dow 

1  The  work  iu  this  case  was  undertaken  for  the  writer  hy  a 
graduate  student  of  the  Kansas  State  Agricultural  College,  Mr. 
Henry  M.  Thomas,  who  had  had  considerable  experience  as  an 
engineer.  The  full  results  of  his  investigation  are  given  in  an 
appendix  to  this  chapter. 


LATEST  ELECTRIC  LIGHT  HEPORTS.        211 

analyzes  the  probable  depreciation  of  the  Detroit 
plant  as  nothing  on  the  land,  2  per  cent  on  the 
buildings  and  wharf,  4  per  cent  on  the  towers 
and  lamp-posts,  5  per  cent  on  the  steam  plant,  and 
10  per  cent  on  the  dynamos  and  other  electrical 
machineiy.  He  has  given  no  estimates  on  the 
remaining  parts  of  the  plant  —  about  one-sixth 
of  the  whole.  Most  of  the  remainder  consists  of 
cables  and  conduits,  which  certainly  do  not  depre- 
ciate any  faster  than  the  rest  of  the  plant.  On  this 
basis  the  depreciation  of  the  entire  plant  is  only 
4.57  per  cent.  Even  3  per  cent  of  the  rest  of  the 
plant,  if  yearly  placed  at  interest,  says  Mr.  Dow, 
would  probably  take  care  of  all  future  renewals 
and  replacements  in  this  plant. 

The  superintendent  of  the  large  Allegheny,  Pa., 
public  lighting-plant,  Mr.  D.  Hunter,  Jr.,  whose 
plant  is  everywhere  conceded  to  be  one  of  the  best 
managed  public  plants  in  America,  and  the  engi- 
neer of  the  equally  famous  South  Park  plant  of 
Chicago,  inform  the  writer  that  they  believe  3  per 
cent  to  5  per  cent  is  sufficient  to  allow  for  depre- 
ciation where  the  cost  of  renewing  apparatus  is 
charged  to  maintenance. 

It  has  seemed  proper,  therefore,  in  the  computa- 
tions of  this  chapter,  to  allow  5  per  cent  deprecia- 
tion for  1897 ;  although  in  some  plants  a  larger 
percentage  has  been  allowed  for  previous  years, 
especially  prior  to  1893.     In  order  that  those  not 


212  MUNICIPAL   MONOPOLIES. 

satisfied  with  this  may  have  a  basis  for  computing 
higher  rates  of  depreciation,  there  is  given  in  the 
same  tables  a  column  showing  the  increased  cost 
that  would  come  from  reckoning  depreciation  at 
Mr.  Foster's  figures  of  7^  per  cent.  Of  course  it 
is  plain  that  having  reckoned  depreciation  at  say 
5  per  cent  as  part  of  the  cost  in  a  given  year,  both 
interest  and  depreciation  must  be  reckoned  the  next 
year  on  only  95  per  cent  of  the  value  of  the  plant 
the  year  before,  unless  allowance  must  be  made  for 
new  construction.  In  other  words,  depreciation  in 
a  city  plant  should  be  considered  equivalent  to  a 
sinking-fund,  unless  it  is  spent  directly  for  exten- 
sions, without  the  issuing  of  additional  bonds  or 
requirement  of  extra  taxes.  The  ignoring  of  this 
simple  matter  has  led  many  critics  of  public  owner- 
ship to  pile  up  enormous  figures  of  cost  against 
public  plants.  It  is  quite  common,  for  instance, 
to  find  the  Chicago  plant  charged  by  critics  with 
full  allowance  for  depreciation  each  year  since  its 
construction,  and  still  charged  with  full  interest 
and  depreciation  to-day  on  all  the  money  ever  put 
into  the  plant. 

COMMERCIAL  BATES. 

In  comparing  the  cost  of  arc  lights  in  public 
plants  that  do  not  do  commercial  lighting  and  in 
private  plants  that  do,  the  former  are  placed  at  a 
disadvantage,  because  private  plants,  with  scarcely 


LATEST  ELECTRIC  LIGHT  REPORTS.        213 

an  exception,  combine  commercial  with  street 
lighting,  which  secures  economy  in  the  production 
of  both.  In  other  cases  where  the  public  plants  do 
commercial  lighting,  it  has  been  impracticable  to 
secure  the  commercial  rates  of  private  companies 
for  comparison  with  the  commercial  rates  of  public 
plants,  but  a  large  amount  of  evidence  at  hand 
points  to  a  higher  charge  for  commercial  lighting 
by  private  than  by  public  plants.  Professor  Com- 
mons has  already  discussed  this  question  with 
reference  to  Massachusetts  and  other  places.  Pro- 
fessor Parsons's  Arena  articles  in  1895  confirm  this. 
The  following  tables,  based  on  the  chapter  on  mu- 
nicipal lighting  in  Michigan,  in  the  report  for  1898 
of  the  Michigan  Bureau  of  Labor  Statistics,  strik- 
ingly confirm  the  same  position. 

TABLE   V.       Commercial  Charges  in  Michigan. 
PRIVATE  PLANTS. 


Name. 

Incan- 

descents 

per 

Month. 

Incan- 

desce?its 

per 

Kilowatt. 

Arcs  per  Month. 
2,000  c.p.    1,200  c.  p. 

Albion, 

$0.60 

$0.15 

$5.00 

Alpina, 

W.  P. 

.75 

.20 

6.25 

Ann  Arbor, 

.14 

6.00 

Adrian, 

.     . 

.14 

6.25 

Battle  Creek 

.65 

.15 

5.00 

Big  Rapids 

W.  P. 

.25 

.10 

3.00 

Fairman, 

W.  P. 

.25 

$3.00 

Bessimer, 

1.00 

5.00 

Codillac, 

.60 

.15 

7.00 

Cbarlotte, 

.75 

.20 

8.33 

Claire, 

.50 

5.00 

Mutual  of  Detroit, 

l.(M) 

.20 

4.00 

214 


M  I  MCIPAL  MONOPOLIES. 


Name. 

Incan- 
descents 

per 
Month, 

hiriui- 

descents 
per 

Kilowatt, 

Arcs  pei 

2,000  c.p. 

Month. 
1,200  c  p. 

Edison, 

.     . 

$0.16 

Flint, 

$0.75 

$6.50 

Grand  Rapids, 

W.  P. 

.10 

8.00 

.      . 

Peninsula  of  Grand  Rapids,  w.  p. 

.60 

5.00 

Edison  of  Grand  Rapids, 

.  .20 

8.50 

<  Ireenville, 

W.  P. 

1.00 

.32 

6.00 

Hastings, 

.50 

.15 

.      . 

Howell, 

.     . 

6.00 

Houghton, 

.63 

.15 

8.00* 

Hudson, 

.60 

.15 

Iron  Mountain, 

.60 

.20 

$8.00 

Ishpeniing, 

.90 

.20 

9.00 

Ironwood  (Twin  City), 

1.00 

.25 

10.00 

Ionia, 

.75 

.20 

9.80 

Jackson, 

.50 

.12 

5.00 

Kalamazoo, 

1.00 

.20 

7.50* 

Ludington, 

.75 

.15 

6.00 

Lapeer, 

.50 

.15 

5.20 

Marine  City, 

1.00 

.15 

5.00 

Menominee, 

.50 

.15 

6.00 

Monroe, 

.70 

.17 

Muskegan, 

1.00 

.16 

6.00 

Mt.  Clemens, 

.75 

.20 

7.00 

Standard  of  Pontiac, 

5.00 

Edison  of  Pontiac, 

.60 

.10 

Port  Huron, 

W.  P. 

.65 

.15 

6.33 

Reed  City, 

W.  P. 

.50 

.10 

5.00 

Saganaw, 

1.00 

.15 

6.50 

Bartlett, 

.50 

.15 

6.25 

Swift  of  Saganaw, 

.     . 

.15 

6.25 

St.  Joseph, 

.75 

.20 

8.00 

Traverse  City, 

.40 

.15 

5.00 

Boardman  River  of  Traverse  City,    .40 

.15 

5.00 

Ypsilanti, 

.75 

.15 

5.00 

Harrison  of  Allegan, 

.75 

5.25 

Edison  of  Allegan, 

.75 

Athens, 

.50 

3.00 

Pioneer  of  Au  Sahle, 

.50 

5.00 

1,200  and  2,000  candle-power. 


LATEST  ELECTRIC  LIGHT  REPORTS.       215 


Same. 

Incan- 
descents 

per 
Month. 

desccn  ts 

per 
Kilowatt. 

Arcspe 
2,1100  cp. 

r  Month. 
1,200  c.p. 

Barage, 

$0.75 

Bronson, 

.GO 

$0.20 

$5.00 

Buchanan, 

.50 

4.17 

Cairo, 

.60 

.15 

5.00 

Carson  City, 

.75 

.13 

6.00 

Cassopolis, 

.40 

•124 

5.00 

Chelsea, 

.75 

.15 

7.00 

Charlevoix, 

.50 

.10 

6.00 

Dundee, 

.50 

5.00 

Eaton  Rapids, 

W.  P. 

6.00 

Fenton, 

.50 

.15 

5.00 

Fowlerville, 

1.00 

5.00 

Frankfort, 

.50 

.20 

5.00 

Gladwin, 

W.  P. 

.33 

4.33 

Howard  City, 

.50 

.     . 

5.00 

Holley, 

.    . 

.15 

5.00 

Homer, 

.80 

4.25 

Imlay  City, 

.50 

4.00 

Ithaca, 

.50 

.15 

5.00 

Jonesville, 

.75 

5.00 

Calcaska, 

2.50 

. 

5.00 

Leslie, 

. 

5.00 

.     . 

Mancelona, 

1.00 

5.00 

Mendon, 

.60 

.15 

5.00 

Milford, 

.50 

.     . 

. 

4.16 

Midland, 

.50 

.     . 

.     . 

5.00 

Mt.  Pleasant, 

.50 

.20 

4.50 

Newaygo, 

.50 

.     . 

4.16 

Glohe  of  Northville, 

.50 

.     . 

5.00 

Otsego, 

.75 

.20 

4.00 

Petoskey, 

W.  P. 

.50 

.15 

6.00 

Plainville, 

.40 

.     . 

.     . 

Standish, 

.15 

4.16 

St.  Louis, 

W.  P. 

.50 

7.50 

Tecumseh, 

.60 

5.40 

Three  Rivers, 

.75 

.15 

5.00 

Vassar, 

.50 

.     . 

5.00 

West  Branch, 

.50 

5.00 

.     . 

Williamston, 

.15 

5.00 

.     . 

Averages, 

$0.66 

$0,162 

$5.83 

$5.20 

216 


MUNICIPAL   MONOPOLIES. 


TABLE   VI.       Commercial  Charges  in  Michigan. 
PUBLIC  PLANTS. 


Incan- 

Tncan- 

Name. 

descent!* 
per 

descenis 
per 

Arcs  per  Month. 

Month. 

Kilowatt. 

2,000  c.  p. 

1,200  c.p. 

Cold  Water, 

. 

$0.05 

$5.00 

East  Taw  as, 

$0.50 

Escanaba, 

.75 

$6.50 

Grand  Haven, 

.25 

.10 

Grand  Ledge, 

.60 

5.00 

Holland, 

.40 

.15 

5.00 

Lansing, 

.75 

.12 

6.50 

Marshall, 

w. 

P. 

.38 

.12 

3.00 

Marquette, 

w 

P. 

.40 

6.00 

.     . 

Niles, 

w. 

P. 

.50 

.08 

3.50 

Stanton, 

.50 

St.  Johns, 

.50 

.15 

4.80 

Wyandotte, 

•16f 

5.00 

Chesaning, 

.50 

.10 

3.30 

Clinton, 

.35 

3.50 

Crystal  Falls, 

.50 

.     . 

Durand, 

.75 

.12 

5.00 

Evart, 

.35 

Flushing, 

.     . 

.12 

5.00 

Hart, 

.40 

Hillsdale, 

1.25 

.10 

Lowell, 

W. 

P. 

.40 

.10 

4.16 

Marietta, 

.50 

Ovid, 

.05 

.13 

5.00 

Oxford, 

.50 

.10 

4.00 

Paw  Paw, 

w. 

P. 

.35 

.08 

2.60* 

Portland, 

w. 

p. 

.50 

3.33 

Shelby, 

.30 

South  Haven, 

.35 

3.50 

St.  Clair, 

.75 

4.00 

Thompsonville, 

.50 

.     . 

Three  Oaks, 

.35 

5.00 

.     . 

Union  City, 

.75 

.16 

Vickshurg, 

.50 

.12 

4.50 

St.  Ignace, 

5.00 

Ypsilanti, 

3.00 
$4.64 

Averages, 

$0,500 

$0,112 

$4.03 

*  1,200  and  2,000  candle-power. 

LATEST  ELECTRIC  LIGHT  REPORTS.        217 

Tables  V.  and  VI.  are  summarized  in  Table  VII. 


TABLE 

VII.       Summary  of  Michigan  Rates. 

Kind  of  Light. 

No.  of 
Public 
riant* 

Charge 
by 

Public 

No.  of 
Private 
Plants 

Charae        Per  Cent  °f 

bv             Ewes*  of 
Private          Chargein 

Compared. 

Plants. 

Compared. 

«"»»•           ffi 

Incandescents  - 

Per  mouth 

32 

$0,506 

76 

$0.66          30.4% 

Incandescents  — 

Per  kilowatt . 

17 

11.2 

56 

16.2         44.6 

Arcs,  2,000  c.  p.  - 

Per  month     .     , 

16 

4.64 

53 

5.83         25.6 

Arcs,  1,200  c.  p.  - 

Per  month     .     , 

9 

4.03 

28 

5.20         29. 

It  will  be  noticed  that  the  76  private  companies 
reporting  the  charge  per  month  for  incandescent 
lights  have  an  average  charge  of  66  cents,  or  30.4 
per  cent  higher  than  the  32  public  plants  that 
reported  an  average  charge  of  50.6  per  cent. 

Where  electricity  is  metered,  the  56  private 
plants  reporting  on  this  head  have  an  average  rate 
of  charge  of  16.2  cents  per  kilowatt,  or  44.6  per 
cent  more  than  the  average  rate  of  11.2  cents  in 
17  public  plants.  The  53  private  plants  charged 
for  commercial  arcs  of  2,000  c.  p.  an  average  of 
15.83  a  month,  at  one-fourth  more  than  the  charge 
of  $4.64  in  16  public  plants  ;  and  28  private  plants 
charge  for  commercial  arc  lights  of  1,200  c.  p.,  an 
average  of  $5.20  a  month,  or  29  per  cent  more 
than  the  average  of  4.03  in  9  public  plants.  It  is 
not  likely  that  the  comparison  of  rates  in  commer- 
cial arc  lights  is  as  fair  as  in  incandescent  lights, 


218  MUNICIPAL   MONOPOLIES. 

especially  where  the  latter  are  metered,  because 
there  is  a  great  difference  in  the  number  of  hours 
burned  by  commercial  arc  lights  in  different  places, 
and  by  different  classes  and  customers',  but  the 
rates  quoted  are  those  given  in  the  report  of  the 
Michigan  Bureau  of  Labor  Statistics.  No  rate  has 
been  omitted  unless  there  is  uncertainty  as  to  the 
proper  comparison  with  other  plants  ;  for  example, 
arc  lights  of  1,400  and  1,600  c.  p.  are  omitted. 

Whatever  else  may  be  in  doubt  regarding  mu- 
nicipal ownership,  it  is  clearly  established  that 
charges  to  ordinary  private  consumers  are  less 
under  that  system  than  under  private  ownership. 
Private  companies  usually  make  liberal  discounts 
to  large  consumers,  but  data  are  not  at  hand  for 
comparing  such  rates  with  those  made  by  public 
plants  of  the  same  size  to  equally  large  consumers. 

DISSATISFACTION   AND   FAILURE. 

The  most  prolific  writer  in  opposition  to  muni- 
cipal ownership,  Mr.  M.  J.  Francisco,  in  his  1898 
edition  of  "  Municipal  Ownership  vs.  Private  Cor- 
porations," and  in  a  paper  read  before  the  street- 
lighting  convention  at  New  Haven,  June  18,  1896 
(published  in  the  Progressive  Age  for  July  1, 1896), 
gives  a  list  of  22  cities  that  have  become,  it  is 
claimed,  dissatisfied  with  city  ownership  of  electric- 
light  plants,  and  have  sold  them.     What  are  the 


LATEST  ELECTRIC  LIGHT  REPORTS.        219 

facts  ?  Of  the  18  cities  from  which  the  writer  has 
been  able  to  hear  in  the  short  time  after  the  list 
was  called  to  his  attention,  one,  Greenville,  S.C., 
never  owned  its  plant.  Seven  appear  still  to  own 
their  plants,  and  to  be  satisfied  with  them;  viz., 
Titusville,  Penn. ;  Madisonville,  Ind. ;  Lyons  and 
Leon,  la.;  Stockton,  Mo.;  Hope,  Ark.;  and  Brain- 
erd,  Minn.  In  the  case  of  a  ninth,  Tacoma, 
Wash.,  the  city  clerk  writes :  — 

"  The  city  plant  was  originally  constructed  for  a  village. 
We  have  now  40,000  inhabitants.  New  engines  were  added 
from  time  to  time,  until  we  had  about  a  dozen,  with  corre- 
sponding expense.  The  Tacoma  Railway  Co.  had  surplus 
power,  and  could  furnish  the  city  power  more  cheaply  than 
the  city  could  furnish  its  own.  It  cost  the  city  2.64  ceuts 
per  kilowatt,  and  we  buy  at  1.62^  cents.  The  city  did  not 
care  to  install  a  new  plant,  as  it  is  only  a  question  of  a  few 
months  when  cheap  water-power  will  be  introduced  here, 
either  by  the  city  or  private  capital.  So  this  arrangement 
is  considered  only  temporary." 

After  the  failure  of  the  electric  plant  in  private 
hands  at  Carrolton,  Ga.,  the  city  merely  took  the 
plant  temporarily,  until  it  could  get  another  com- 
pany to  accept  the  franchise. 

Taking  up  the  five  others  in  turn,  we  come  to 
Michigan  City,  Ind.  After  an  apparently  success- 
ful experience,  this  city  suddenly  found  the  cost 
of  operation  mysteriously  increased  from  $43  to 
an  arc,  at  a  time  when  the  street  railway  com- 


220  MUNICIPAL   MONOPOLIES. 

pany,  which  had  a  strong  backing  with  the  city 
government,  attempted  to  buy  the  plant.  The  re- 
sult was  a  sale  of  the  plant  by  the  city  in  1892. 

The  city  of  Wabash,  Ind.,  also  sold  its  plant 
some  years  ago,  but  not  for  $30,  as  reported  by 
Mr.  Francisco ;  neither  did  it  cost,  as  he  claimed, 
anywhere  near  $18,000,  if  the  officials  of  the  city 
are  to  be  believed.  p 

At  Xenia,  O.,  both  public  and  private  ownership 
have  failed.     The  mayor  wrote,  July  8,  1898 :  — 

"  The  city  built  the  plant  at  a  cost  of  $30,000.  It  was 
sold  for  $10,000,  and  the  purchasers  failed  to  pay  for  it.  It 
is  in  the  hands  of  a  receiver,  and  no  light  at  present." 

The  mayor  of  Marceline,  Mo.,  writes :  — 

"  The  electric-light  plant  was  put  in  by  the  Thompson- 
Houston  Co.  After  it  had  been  run  some  time,  the  city 
was  induced  to  buy  it  for  $6,000.  The  city  ran  the  plant 
a  few  years,  and  gave  it  up  as  a  bad  job,  finding  it  very 
expensive.  After  lying  idle  some  time,  it  was  sold  to  the 
company  now  running  it  for  about  $800,  which  was  paid  in 
service.  The  city  paid  with  bonds  which  were  illegally 
issued,  and  were  never  paid.  The  property  was  never  worth 
anything  like  the  price  paid  for  it  by  the  city." 

The  mayor  of  Moline,  111.,  writes  :  — 

"  This  city  owned  its  own  plant,  and  sold  it  for  $7,500, 
not  because  of  dissatisfaction,  but  for  the  reason  that  it 
would  have  cost  about  $20,000  to  reconstruct  it,  and  the 


LATEST  ELECTRIC  LIGHT  REPORTS.       221 

city  could  not  raise  the  money.  It  was  sold  before  my 
administration  ;  and  I  always  thought  it  was  a  wrong  more, 
as  I  am  fully  in  favor  of  municipal  ownership." 

The  mayor  of  Tipton,  la.,  writes:  — 

"  Our  city  formerly  owned  an  electric-light  plant.  It 
was  burned  out,  and  at  that  time  the  city  was  too  heavily 
involved  to  put  in  a  new  one.  They  gave  a  franchise  to 
private  individuals  to  put  in  a  plant,  reserving  the  right 
of  purchase.  The  ownership  of  the  plant  by  the  city  was 
highly  satisfactory,  and  was  the  source  of  some  revenue." 

The  mayor  of  Portland,  Ore.,  writes :  — 

"  Some  five  years  ago,  when  Portland,  East  Portland,  and 
Albina  were  consolidated  into  one  city,  East  Portland  had 
a  municipal-light  plant,  which,  through  the  influence  over 
the  City  Council  of  the  Electric  Light  Co.,  was  sold  to  that 
company.  We  are  now  paying  to  the  electric-light  mo- 
nopoly about  two  prices  for  lighting,  without  much  hope  of 
deliverance." 

So  much  for  complete  failures  in  city  ownership, 
so  far  as  developed  by  a  former  president  of  the 
National  Electric  Light  Association,  who  claims 
to  have  been  gathering  exhaustive  information  on 
municipal-owned  plants  ever  since  1888  or  1889, 
when  he  began  to  publish  on  the  subject. 

Almost  equally  unfounded  is  the  charge  that 
city  ownership,  though  still  continued,  is  proving 
very  unsatisfactory.  In  the  Electrical  Engineer 
for  Feb.   17,  1897,  appear  letters  from   superin- 


222  MUNICIPAL  MONOPOLIES. 

tendents  or  other  high  officials  of  54  city-owned 
electric-light  plants,  received  by  the  special  inves- 
tigating committee  on  commercial  lighting  of  South 
Norwalk,  Conn.  Of  these  replies,  36,  or  two- 
thirds,  express  themselves  strongly  in  favor  of  city 
ownership.  Of  the  remaining  18,  ten  do  not  touch 
the  question,  save  as  they  specify  conditions  of 
successful  public  management.  Only  four  super- 
intendents, or  8  per  cent,  write  unfavorably;  and 
the  remaining  four  are  sharply  critical  rather  than 
distinctly  unfavorable.  For  example,  the  head 
of  one  plant  sees  no  objection  to  cities  of  under 
20,000  inhabitants  doing  commercial  lighting,  and 
apparently  no  objection  to  any  city  doing  street- 
lighting.  Another  thinks  municipal  plants  are  not 
so  economical  or  well  managed  as  they  should  be ; 
and  another  superintendent  writes  that  city  own- 
ership can  be  made  a  success  when  the  superin- 
tendent is  left  free  to  use  his  own  discretion  and 
judgment. 

In  the  present  inquiry,  during  the  early  part  of 
1898,  replies  have  been  received  from  over  80  plants. 
While  some  of  these  did  not  answer  all  the  ques- 
tions asked,  every  one  replied  to  the  query  whether 
public  ownership  was  satisfactory.  All  replied 
favorably  and  some  enthusiastically,  with  the  ex- 
ception of  seven,  or  about  one  in  twelve,  and  the 
superintendent  of  one  of  the  seven  reported  good 
financial  results.     When  requested  to  particularize 


LATEST  ELECTRIC  LIGHT   REPORTS.        223 

why  he  was  opposed  to  city  ownership,  he  could 
scarcely  present  any  reason,  except  that  he  did  not 
have  the  motive  for  developing  the  business  that 
he  would  have  if,  like  his  brother  who  was  mana- 
ger of  a  private  plant,  he  could  invest  in  the  stock 
of  the  enterprise  for  which  he  was  working.  The 
other  six  plants  are  Troy,  Ala.;  Grand  Ledge, 
Mich. ;  Niles,  Mich. ;  Coal  City  and  Metropolis, 
111. ;  and  Chehalis,  Wash.  The  complaint  given 
most  prominence  in  the  replies  from  these  cities 
was  that  the  charge  to  private  consumers  was 
placed  much  below  cost ;  but  that  so  large  a  pro- 
portion—  over  90  per  cent  —  of  the  plants  heard 
from  have  found  city  ownership  satisfactory  is  very 
significant. 

PUBLIC   LIGHTING   IN   MASSACHUSETTS. 

The  well-known  opponent  of  public  ownership, 
Mr.  Francisco,  in  an  article  in  City  Government  in 
April,  1898,  attempts  to  draw  conclusions  from  the 
Thirteenth  Annual  Report  of  the  Massachusetts 
Gas  and  Electric  Light  Commission,  covering  the 
fiscal  year  July  1,  1896,  to  June  30,  1897,  which 
are  so  unfavorable  to  city  ownership  that  an  exam- 
ination of  his  statements  is  in  order. 

The  charges  for  street  arc  lights  by  private  com- 
panies in  seven  of  the  largest  Massachusetts  cities, 
including  Boston,  Worcester,  and  Springfield,  are 
compared  in  his  computations  with  the  cost  in  the 


224  MUNICIPAL   MONOPOLIES. 

fourteen  Massachusetts  cities  that  own  their  elec- 
tric-light plants.  As  the  largest  of  these,  Chicopee, 
had  only  16,420  population  in  1895,  the  next 
largest,  Peabody,  had  only  10,50?,  and  the  third 
largest,  Wakefield,  had  but  8,304,  while  the  others 
had  populations  ranging  from  these  figures  down  to 
1,044  in  Hull,  such  a  comparison  of  rates  is  ob- 
viously unfair;  and  even  our  critic's  computation 
of  the  cost  in  these  public  plants  is  incorrect. 

Mr.  Francisco  finds  in  these  plants  985  arc  lights 
of  1,200  c.  p.  each,  and  2,175  incandescents  of  an 
average  of  27  c.  p.  each.  The  latter  he  assumes 
equivalent  to  48  arcs  only.  The  standard  author- 
ities give  the  cost  of  a  2,000  c.  p.  arc  as  about 
equivalent  to  10  incandescents  of  16  c.  p.,  or  about 
6  of  27  c.  p.,  while  the  cost  of  a  1,200  c.  p.  arc  is 
about  75  per  cent  of  a  2,000  c.  p. ;  so  that  we  may 
roughly  estimate  a  1,200  c.  p.  arc  as  equivalent  to 
about  4.5  incandescents  of  27  c.  p.  or  4  of  25  c.  p. 
in  the  cost  of  operation. 

Many  of  the  Massachusetts  companies  regulate 
their  charges  substantially  on  this  basis.  In  Quincy, 
for  example,  the  charges  are  $20  a  year  for  an  in- 
candescent of  25  c.  p.,  and  175  a  year  for  one  of 
1,200  ;  in  Arlington  the  charges  are  $24  and  $90 
respectively;  Belmont,  $22  and  $85;  Revere,  $16 
and  $72;  Gardner,  $15  and  $75;  and  Springfield, 
$24  and  $75.  On  the  basis  of  4.50  incandescents 
of  27  c.p.as  equivalent  to  one  arc  of  1,200  c.  p.,  the 


LATEST  ELECTRIC  LIGHT  REPORTS.        225 

2,175  incanclescents  in  the  14  Massachusetts  cities 
above  referred  to  would  be  equivalent  to  524 
arcs,  instead  of  48,  as  estimated  by  Mr.  Fran- 
cisco. It  is  no  wonder  that  his  conclusions  would 
indicate  an  excessive  cost  per  arc  light  in  a  public 
plant ! 

On  pages  154-155  of  this  book,  in  a  note  to 
Professor  Commons's  analysis  and  comparison  of 
these  costs  with  those  of  private  companies  in 
Massachusetts,  attention  was  called  to  the  important 
fact,  that  of  the  12  Massachusetts  towns  that  had 
owned  their  plants  more  than  one  year,  eight  se- 
cured their  street  lights  cheaper  than  the  average 
of  the  other  towns  and  cities  of  the  State  that  had 
private  ownership,  and  one  other  of  the  12  secured 
cheaper  light,  if  depreciation  be  reckoned  in  1896- 
1897  at  3  per  cent  instead  of  5  per  cent.  In  all 
cases  the  full  interest  and  depreciation  as  computed 
by  the  Massachusetts  Gas  and  Electric  Light  Com- 
mission is  accepted.  Of  the  remaining  three  towns, 
Hull  had  only  1,044  population  in  1895,  being  one 
of  the  smallest  towns  in  the  State  to  possess  any 
electric-light  plant,  and  therefore  could  not  be 
reasonably  compared  with  larger  places  in  the  mat- 
ter of  costs,  while  Braintree  had  only  5,311  popu- 
lation. The  third  town,  Wakefield,  has  made  such 
a  reduction  in  cost  since  June,  1897,  that  the  next 
report  will  probably  place  this  town  with  the 
majority. 


226  MUNICIPAL   MONOPOLIES. 

If  the  public  plants  of  Massachusetts  should 
charge  as  much  for  commercial  lighting  as  is  the 
average  charge  in  private  plants  of  the  same  size 
in  that  State,  almost  every  one  of  the  Massachusetts 
towns  having  public  plants  would  secure  its  street 
lights  cheaper  than  do  the  remaining  towns  of  the 
same  size  in  the  State- 
As  indicative  of  the  progress  being  made  in 
Massachusetts  public  lighting,  even  since  June, 
1897,  reference  may  be  made  to  the  four  public 
plants  of  which  recent  reports  have  been  obtained 
by  the  writer.  Wakefield  and  Middleborough  have 
small  gas  plants  in  connection  with  their  electric- 
light  plants,  but  under  the  Massachusetts  law  were 
forced  to  paj^  more  for  them  to  the  private  owners 
than  they  seem  to  have  been  worth ;  for  the  Mas- 
sachusetts law,  in  providing  very  carefully  against 
any  wrong  to  the  existing  companies  when  city 
ownership  is  begun,  often  leads  to  the  necessity  of 
a  city  paying  too  much  for  an  existing  plant.  Yet 
both  Wakefield  and  Middleborough  have  of  late 
gradually  improved  the  management  of  their  works, 
and  are  satisfied  that  they  did  wisely  to  own  their 
plants.  In  Wakefield,  after  deducting  the  receipts 
from  commercial  lighting,  the  net  operating  ex- 
penses of  both  gas  and  electric  light  per  arc,  if  con- 
centrated on  the  electric-light  plant,  were  123.47 
in  the  calendar  year  1895,  $18.27  in  1896,  and 
$11.79  in  1897.     The  plant  was  poorly  equipped, 


LATEST  ELECTRIC  LIGHT  REPORTS.        227 

and  was  a  financial  failure  under  private  owner- 
ship. 

The  net  operating  expenses  above  receipts  of 
the  Middleborough  Gas  and  Electric  Light  Plant 
was  18,310.45  in  1896-1897,  or  $87.48  for  each 
of  the  95  arc  lights  of  1,200  c.  p.,  and  only 
$3,125.01  in  1897-1898,  or  $44.64  for  each  of 
the  70  lights  or  their  equivalent.  For  the  sake  of 
economy  there  was  some  reduction  in  the  number 
of  hours  per  light,  as  well  as  in  the  number  of 
lights,  but  not  sufficient  to  account  for  the  great 
reduction  in  expense.  During  the  calendar  year 
1897,  Peabody,  Mass.,  reported  a  total  expense, 
including  interest  and  depreciation,  of  $74.59,  in- 
stead of  $78.54  for  each  of  its  166  arcs  in  the  year 
June,  1896,  to  June,  1897,  while  the  North  Attle- 
borough,  Mass.,  plant,  during  the  calendar  year 
1897,  after  deducting  commercial  receipts,  but  in- 
cluding interest  and  depreciation,  reduces  the  total 
net  cost  of  586  street  incandescent  lights  of  32  c.p. 
each,  burning  1,475  hours  per  year,  from  $14.05 
per  year  to  $11.20. 

The  Chicopee  plant  has  been  widely  advertised 
as  costing  $130.69  per  arc  light  of  1,200  c.  p., 
burning  2,654  hours  June  30,  1896-1897,  and  pay- 
ing $3.40  for  coal.  But  the  Gas  and  Electric 
Light  Commission  say  that  their  report  should 
have  given  the  cost  as  about  $112,  including  4  per 
cent  interest  and  5  per  cent  depreciation.     They 


228  MUNICIPAL  MONOPOLIES. 

will  probably  report  the  cost  during  1897-1898  as 
$95.41,1  while  incandescent  light  was  sold  at  the 
very  low  price  for  Massachusetts,  of  twelve  cents 
per  kilowatt.  If  the  plant  were  run  to  its  full  ca- 
pacity, as  it  probably  will  be  in  a  short  time,  from 
the  present  rate  of  growth,  the  total  cost  will  be 
about  175  per  arc  light.  At  present  the  fixed 
charges  are  abnormally  high,  because  a  State  board 
of  arbitrators  forced  the  city  to  pay  127,000  for  an 
old  and  poor  plant,  that  even  if  new  would  not 
have  cost,  according  to  the  city's  expert,  over 
$12,000.  After  putting  in  nearly  170,000  of  re- 
newals and  extensions,  the  city  is  not  now  using 
over  $5,000  worth  of  the  old  plant. 

1  The  net  operating  expenses  for  the  year  ending  June  30, 
1898,  after  deducting  receipts  from  incandescent  lighting  and 
commercial  arc  lights,  was  $4,933.37.  If  to  this  he  added  the 
interest  on  the  plant  of  $3,290,  and  1.9  per  cent  depreciation,  or 
.3  per  cent  more  than  written  off  on  the  average  in  the  83  private 
plants  of  Massachusetts  in  1896-1897,  the  net  cost  to  the  city  of  each 
of  its  135  arc  lights  was  $75  in  the  year  just  closed.  An  allowance 
of  5  per  cent  for  depreciation  would  raise  this  to  $87.75.  These 
figures,  indorsed  hy  the  manager  of  the  plant,  are  disputed,  he 
says,  in  one  point,  hy  the  Massachusetts  Gas  and  Electric  Light 
Commission,  which  claims  that  $900  expended  for  replacing  wires 
and  poles  should  he  included  in  operating  expenses,  instead  of  in 
depreciation,  as  estimated  ahove. 

In  the  neighboring  city  of  Springfield,  with  over  three  times 
the  population  and  over  twelve  times  the  consumption  of  electri- 
city, the  average  charge  is  about  the  same  as  in  Chicopee,  al- 
though twice  as  high  (one  and  one-fourth  cent  per  ampere  hour) 
to  consumers  of  less  than  about  $6  (500  ampere  hours)  per  month. 


LATEST  ELECTRIC  LIGHT  REPORTS.        229 
VALIDITY   OF    ELECTRIC    LIGHT    COMPARISONS. 

In  an  appendix  to  this  chapter  is  given  a  paper 
by  Professor  Perrine,  of  Leland  Stanford  Univer- 
sity, showing  the  difficulties  in  comparing  dif- 
ferent lighting-plants.  So  far  as  possible  these 
difficulties  have  been  avoided  in  the  comparisons 
to  follow,  by  considering  together  only  those  plants 
whose  street  arc  lights  burn  approximately  the 
same  number  of  hours  per  year,  and  where  the 
cost  of  coal  per  ton  is  about  the  same.  Even 
after  all  care  possible  has  been  exercised  to  secure 
fair  comparisons  between  private  and  public  plants, 
it  must  still  be  admitted  that  the  comparisons  re- 
late only  to  the  relative  cost  to  the  taxpayers  and 
consumers,  and  do  not  directly  touch  the  question 
propounded  by  Professor  Perrine,  as  to  whether 
private  or  public  ownership  procures  the  produc- 
tion of  electric  light  with  the  least  expenditure 
of  human  energy,  by  reason  of  utilizing  the  best- 
adapted  machinery  and  other  equipment,  and  by 
the  least  waste  and  best  supervision  of  operation. 

Too  little  attention  has  undoubtedly  been  paid 
to  this  latter  problem,  but  it  cannot  be  properly 
treated  until  we  have  data  which  it  seems  hope- 
less to  expect  for  some  years.  Meantime  we  may 
profitably  compare  the  cost  to  the  taxpayers  and 
consumers.  In  fact,  any  system  of  lighting  will 
probably  be  preferred  by  the  public,  and  rightly 


230  MUNICIPAL    MONOPOLIES. 

so,  if  it  secures  lighter  burdens  to  consumer  and 
taxpayer,  even  though  the  sum  of  human  energy 
required  by  that  system  be  greater  than  in  some 
other  system.  As  long  as  the  owners  of  private 
plants  are  chiefly  the  well-to-do,  and  as  long  as 
the  greatest  industrial  problem  is  the  wise  distri- 
bution of  the  income  of  society,  most  economists 
will  not  give  the  preference  to  such  a  system  as 
will  give  the  best  engineering  results,  unless  these 
results  be  accompanied  by  greater  benefits  to  tax- 
payers and  consumers  than  some  other  system  of 
ownership. 

All  statistics  at  hand,  however,  regarding  Eng- 
lish electric-lighting  plants,  and  we  have  far  more 
information  regarding  them  than  we  have  regard- 
ing others,  indicate  that  public  ownership  under 
civil-service  conditions  need  not  fear  comparison 
with  private  ownership,  even  in  the  matter  of  com- 
paring expenses  or  the  expenditure  of  human  en- 
ergy. Public  ownership,  however,  will  be  very 
much  improved  in  America  when  the  points  made 
by  Professor  Perrine  are  fully  grasped  and  acted 
upon. 

BRITISH   EXPERIENCE. 

In  Great  Britain  the  oldest  private  electric-light 
plants  were  established  at  Eastbourne  and  Has- 
tings in  1882  ;  London,  1885  ;  and  by  three  other 
companies  in  1887-1888,  one  of  which,  the  Shef- 


LATEST  ELECTRIC  LIGHT  REPORTS.        231 

field   plant,   established    in    1887,   has   just  been 
bought  by  the  municipality. 

The  oldest  municipal  electric  works  are  those  at 
Bradford,  1889;  Brighton  and  St.  Pancras,  1891. 
In  1882  the  British  Board  of  Trade,  acting  on  the 
authority  of  Parliament,  put  such  restrictions  upon 
the  development  of  private  electric  enterprises  as 
greatly  to  discourage  their  formation.  In  1888  a 
new  Act  was  passed,  in  accordance  with  which  the 
Board  of  Trade  may  give  what  in  America  would 
be  called  a  franchise  or  license,  but  what  in  Eng- 
land is  called  a  provisional  order,  to  a  private 
company  for  42  years,  at  the  end  of  which  time, 
and  of  every  10  years  thereafter,  the  municipality 
may  buy  the  plant  at  the  then  value  of  the  tangi- 
ble assets,  without  paying  anything  for  goodwill  or 
prospective  profits.  Due  regard,  however,  must 
be  taken  of  the  circumstances  "  that  the  plant, 
works,  etc.,  are  in  such  a  condition  as  to  be  ready 
for  immediate  working."  The  Board  of  Trade 
may  also  give  a  provisional  order  to  a  municipality 
Such  orders,  whether  for  private  companies  or 
municipalities,  unless  utilized,  lapse  at  the  end  of 
two  years,  although  they  may  be  renewed. 

At  the  end  of  1897,  according  to  the  English 
Municipal  Year  Book  for  1898,  there  were  121 
electric-light  works  in  operation,  67  under  muni- 
cipal management,  and  54  in  private  hands  ;  41 
new  plants  were  being  erected,  of  which  37  were 


232  MUNICIPAL   MONOPOLIES. 

by  public  bodies ;  while  100  cities  and  towns  and 
only  11  private  companies  held  licenses  for  new 
plants.  During  the  year  there  were  42  applica- 
tions for  provisional  orders  by  public  bodies,  and 
13  by  private  companies,  only  five  of  the  latter 
being  granted.  The  Board  of  Trade  may  permit 
more  than  one  company  in  the  same  district,  but 
rarely  does  so. 

According  to  the  famous  municipal  journal 
London,  June  23,  1898,  the  London  private  com- 
panies have  a  subscribed  capital  of  <£6, 012, 681  ; 
and  the  stock  is  worth  twice  that  in  the  market, 
because  of  the  high  charges  of  these  companies, 
which  have  been  absolute  monopolies  without  pub- 
lic control.  The  stock  of  these  companies  fell 
,£2,000,000  in  value  in  the  week  following  June  14, 
when  the  House  of  Commons  passed  bills  permit- 
ting city  competition  with  these  London  companies 
in  the  two  parishes  of  Marylebone  and  Bermondsey. 
The  permission  to  Marylebone  was  subsequently 
withdrawn,  in  part  because  of  the  opposition  of  the 
friends  of  municipal  ownership  who  oppose  com- 
petition with  either  private  or  public  plants  during 
the  life  of  their  franchises.  In  several  large  Lon- 
don parishes  where  private  companies  have  never 
been  established,  the  people  have  erected  good 
public  plants.  The  most  famous  of  these  is  Shore- 
ditch,  which  has  established  the  first  practical 
scheme  for  utilizing  the  heat  from  dust  destructors 


LATEST  ELECTRIC  LIGHT  REPORTS.        233 

for  generating  electric  light.  Its  combined  scheme 
for  a  dust  destructor,  electric-lighting  works,  pub- 
lic baths  and  wash-houses,  and  central  library,  will 
cost  over  £100,000. 

The  electric-light  plant,  costing  £ 67,646,  was 
started  June  28,  1897,  and  has  been  a  marked 
success ;  although  if  it  cost  nothing  to  destroy  in 
other  ways  the  dust  and  dirt  gathered  from  the 
streets,  the  city  might  find  it  nearly  as  profitable 
to  use  coal. 

Outside  of  London,  only  £1,320,291  of  capital 
is  invested  in  private  electric-light  plants  of  any 
importance.  There  are  only  two  such  plants  in 
cities  of  100,000  population;  viz.,  Newcastle  and 
Norwich.  The  other  most  important  places  are 
the  minor  cities,  at  least  in  size  and  business, 
Cambridge,  Oxford,  Northampton,  Reading,  Scar- 
borough, Hastings,  Hove,  Eastbourne,  Dover, 
Bournemouth,  Chatham,  and  Chelmsford.  Evi- 
dently public  ownership  of  electric-light  plants  in 
Great  Britain  is  sweeping  everything  before  it. 

A  writer,  Claud  P.  D'oyle,  in  the  Electrical 
Engineer  for  April  11  and  21,  1898,  selects  11 
public  and  15  private  companies,  of  approximately 
the  same  size,  the  14  public  companies  having  an 
average  daily  output  of  882  kilowatts,  and  the  15 
private  companies  an  average  of  998  kilowatts ; 
yet  the  average  capital  per  kilowatt  in  the  public 
plants  was  $4.18,  and  in  the  private  $6,55,  while 


234  MUNICIPAL  MONOPOLIES. 

the  average  capital  per  lamp,  apparently  incandes- 
cent lamps,  was  $13.25  in  the  public  plants  and 
$17.80  in  the  private  plants  ;  i.e.,  the  private  plants 
were  trying  to  earn  interest  and  other  fixed  charges 
on  50  per  cent  more  capital  for  the  same  output 
than  were  the  public  companies. 

It  is  no  wonder  that  the  Municipal  Year  Book 
states  that  the  "private  supply  of  electricity  has 
almost  come  to  a  standstill,  and  will  have  to  con- 
fine its  progress  to  the  area  already  under  its 
control." 

The  following  letter  in  the  United  States  Con- 
sular Reports  for  April,  1898,  from  Consul-Gene ral 
Dubois,  of  St.  Gall,  Germany,  gives  certain  facts 
relating  to  municipal  electric  light  and  power  in 
Germany:  — 

"  In  the  following  cities  in  the  German  Empire,  the  mu- 
nicipal authorities  own  and  manage  the  electric  works  that 
supply  light  and  power, — Bremen,  Barmen,  Cassel,  Darm- 
stadt, Diisseldorf,  Elberfeld,  Hanover,  Cologne,  Konigsberg, 
Lubeck,  Pforzheim  All  of  these  cities,  with  the  exception 
of  Hanover,  also  own  the  gas-works.  The  following  cities 
have  constructed  electric  works  for  the  purposes  of  light 
and  power,  but  have  leased  the  management  of  the  same  to 
private  operators,  —  Aix-la-Chapelle,  Chemnitz,  Frankfort, 
Strasburg,  and  Stuttgart,  all  of  which,  with  the  exception 
of  one,  Chemnitz,  are  cities  where  the  gas-works  are  under 
the  management  of  private  corporations.  In  the  following 
cities,  private  companies  have  .established  electric  works, 
with  the  agreement  that,  under  certain  conditions,  the 
municipal  authorities  shall  have  the  privilege  of  securing 


LATEST  ELECTRIC  LIGHT  REPORTS.       235 

absolute  control  and  ownership  by  purchase,  —  Altuna,  Des- 
sau, Gera,  Hagen,  Heilbronn,  Leipsic,  MUlhausen,  Stettin, 
and  Zwickau.  Of  these  cities,  the  gas-works  are  under  pri- 
vate control  in  Dessau,  Hagen,  MUlhausen,  and  Zwickau." 

METHODS    OF    COMPARISON. 

In  the  following  21  tables,  74  public  piants  have 
been  compared  with  132  that  are  privately  owned. 
Every  public  plant,  no  matter  how  poorly  man- 
aged, from  which  adequate  data  could  be  obtained 
in  the  limited  time  at  command,  is  here  given. 

When  a  public  lighting-plant  is  combined  with 
public  water-works,  the  effort  has  been  made  to 
apportion  the  expenses  to  each  plant  according 
to  the  work  done.  Where  a  city,  however,  already 
operates  its  water-works,  only  the  additional  ex- 
penses entailed  by  the  lighting-plant  actually  rep- 
resent any  added  cost  of  the  latter,  and  are  the 
only  expenses  that  need  to  be  apportioned  to  the 
electric  lighting. 

The  total  cost  of  each  arc  light  is  computed 
by  deducting  from  the  operating  expenses  receipts 
from  commercial  and  domestic  lights,  where  there 
are  such,  and  adding  5  per  cent  on  the  value  of 
the  plant  for  interest,  and  5  per  cent  more  for  de- 
preciation. Taxes  may  be  ignored,  in  accordance 
with  the  principles  brought  out  by  Professor  Com- 
mons in  the  previous  chapter.  For  the  benefit, 
however,  of  those  who  insist  on  a  larger  allowance 


236  MUNICIPAL   MONOPOLIES. 

for  taxes  and  depreciation,  another  column,  No.  10, 
is  given  in  nearly  every  table  of  public  plants.  In 
this  the  cost  is  given  with  1\  per  cent  for  depre- 
ciation and  taxes  ;  although  the  average  allowance 
of  all  the  private  plants  owned  by  Massachusetts 
companies  for  depreciation  in  1896  and  1897,  as 
has  been  shown,  was  under  2  per  cent,  and  taxes 
average  less  than  1  per  cent  of  assets  in  most 
States,  and  less  than  1^  per  cent  even  in  Massa- 
chusetts, where  such  taxes  are  unusually  high. 

In  arriving  at  the  value  of  the  plants  on  which 
the  interest  and  depreciation  are  obtained,  the  cost 
of  a  plant  as  reported  by  the  officials,  together  with 
the  new  construction  added  from  time  to  time,  has 
been  depreciated  5  per  cent  yearly.  It  would  be 
obviously  unfair  to  charge  a  plant  with  yearly  de- 
preciation costs  unless  the  amount  so  charged  is 
actually  set  aside  for  reducing  the  capital  account 
created  by  the  cost  of  original  construction  and 
extensions. 

No  more  clever  deception  has  been  attempted 
upon  an  unsuspecting  public  than  appears  in  the 
requirement  in  Massachusetts  that  every  public 
lighting  company  shall  return,  as  part  of  the  cost 
of  light,  5  per  cent  depreciation,  while  these  com- 
panies are  not  forced  actually  to  set  aside  such  a 
fund,  although  another  provision  of  law  requires 
the  payment  of  municipal  gas  and  electric-light 
bonds  within  thirty  years.      The  practical  result  is, 


LATEST  ELECTRIC  LIGHT  REPORTS.        237 

that  the  interest  charge  per  arc  light  does  not 
decline  at  all  by  reason  of  this  book-keeping  de- 
vice. Simply  the  apparent  cost  of  light  in  the 
public  companies  is  made  to  appear  high  by  virtue 
of  a  charge  on  the  books  of  over  twice  the  per- 
centage of  depreciation  set  aside  on  the  average 
by  the  eighty-two  private  companies  of  the  State. 
For  example,  if  a  plant  costs  for  construction 
$200  per  light,  it  is  not  fair  to  charge  5  per  cent, 
or  $10  as  a  depreciation  cost,  unless  the  $10  is  so 
spent  that  the  next  year  the  capital  account  on 
which  interest  is  paid  is  reduced  to  $190. 

In  this  investigation,  however,  unless  expressly 
stated  to  the  contrary,  the  annual  depreciation 
charge  of  five  per  cent  has  been  deducted  from  the 
cost  of  the  plants,  as  well  as  included  in  yearly 
expenses,  in  order  to  arrive  at  the  present  proper 
capitalization. 

"Where  cities  have  not  so  reduced  their  capital 
account,  they  have  not  been  at  more  than  two  per 
cent  expense  annually,  in  most  cases  for  renewals, 
other  than  are  included  in  regular  repair  accounts. 

The  total  number  of  street  and  commercial  arcs, 
and  the  total  number  of  incandescents  used  by  pri- 
vate plants,  is  obtained  from  the  American  Electri- 
cal Directory,  for  the  first  quarter  of  1898.  All 
the  other  data  in  these  tables  are  taken  from  Bul- 
letin No.  4112,  issued  Aug.  1(3, 1897,  by  the  Gene- 
ral Electric  Company,  at  Schenectady,  New  York. 


238  MUNICIPAL  MONOPOLIES. 

This  Bulletin  gives  returns,  claimed  to  be  accu- 
rate, from  500  different  plants,  in  all  parts  of  the 
country,  using  the  arc  apparatus  of  the  General 
Electric  Company.  Every  private  plant  in  this  Bul- 
letin, where  the  rates  are  clearly  given  and  which 
comes  in  the  same  class  regarding  hours,  price  of 
coal,  etc.,  with  the  public  plants,  is  quoted.  As 
the  Bulletin  of  the  General  Electric  Company  was 
issued  near  the  end  of  1897,  and  is  supposed  to  pre- 
sent the  latest  information  for  such  plants,  the  dates 
of  the  fiscal  years  of  the  two  classes  of  plants  in 
all  these  tables  are  practically  identical. 

In  arriving  at  the  average  cost  for  each  of  the 
following  tables,  for  both  public  and  private 
plants,  the  attempt  has  been  made  merely  to  give 
the  average  of  costs  less  commercial  receipts  of 
the  several  companies,  rather  than  to  weight  each 
company  with  its  relative  importance  as  measured 
by  the  total  number  of  lights.  The  method  used, 
when  applied  to  large  numbers  of  companies  se- 
lected as  in  these  tables,  is  as  fair  as  any  other 
method  of  comparison.  To  avoid  decimals  the  unit 
of  cost  is  taken  as  100  hours,  instead  of  one  hour. 

It  is  believed  that  this  is  the  first  extensive 
comparison  of  public  and  private  electric-lighting 
plants  wherein  only  plants  burning  approximately 
the  same  number  of  hours  and  paying  the  same 
price  for  fuel  are  compared.  The  comparison  is 
still  unfair  to  the  public-owned  plants  in  one  re- 


LATEST  ELECTRIC  LIGHT  REPORTS.        239 

spect, —  thirty-nine  of  the  seventy-three  plants,  or 
over  one-half,  do  not  have  the  advantage  of  a  com- 
bination of  street  with  commercial  and  domestic 
lighting,  to  say  nothing  of  the  fact  that  where 
such  lighting  is  done  by  the  public  plants  the 
charges  are  usually  less  than  in  the  case  of  private 
companies,  and  consequently  the  opportunity  to 
make  a  strong  financial  showing  by  a  low  net  cost 
of  arc  lights  is  correspondingly  lessened.  No  bet- 
ter authority  can  be  found  for  this  claim  that  cities 
doing  only  street-lighting  are  handicapped  than 
the  statement  of  Mr.  Alex  Dow,  general  manager 
of  the  Detroit  Edison  Illuminating  Company:1 

"  In  performing  this  service  [the  supply  of  commercial 
light  by  a  private  company],  there  will  be  built  and 
equipped  a  power-house ;  there  will  be  organized  an  operat- 
ing and  a  managing  force ;  there  will  be  constructed  lines 
of  distribution.  All  of  these  may  be,  and  part  of  them  cer- 
tainly will  be,  adapted  to  the  performance  of  public  light- 
ing, in  addition  to  the  service  of  private  consumers.  To 
whatever  extent  this  double  adaptability  exists  in  the  pri- 
vate plant,  there  will  be  a  duplication  of  equipment  in  any 
other  plant  separately  established  for  performance  of  the 
public  work.  Moreover,  it  is  peculiarly  characteristic  of 
public  lighting  operated  all  night,  that  its  addition  to  the 
ordinary  work  of  a  private  lighting-plant  tends  to  reduce 
the  average  cost  of  the  combined  output.  In  these  consid- 
erations rests  the  possibility  of  a  contractor  profitably  per- 

1  Paper  before  Twenty-first  Convention  of  the  National  Electric 
Light  Association,  June  8,  1898. 


240  MUNICIPAL  MONOPOLIES. 

forming  public  lighting  for  a  city  at  or  below  the  price  at 
which  the  city  can  itself  do  the  work,  and  yet  it  being  to 
the  interest  of  the  contractor  to  undertake  the  business." 

This  condition  of  affairs  makes  even  more  strik- 
ing the  lesson  of  the  accompanying  tables,  num- 
bers XIII.  to  XXXII.  inclusive,  which  may  be 
thus  stated:  When  lighting-plants  in  considerable 
numbers  are  grouped  according  to  candle-power, 
hours  burned,  cost  of  coal,  size,  etc.,  the  average 
charge  by  private  companies  in  every  group,  so  far 
as  this  investigation  has  been  able  to  go,  is  more 
than  the  cost  in  public  companies,  even  where,  in 
addition  to  five  per  cent  interest,  seven  and  one- 
half  per  cent  is  allowed  for  depreciation,  loss  of 
taxes  and  other  items  possibly  omitted  from  these 
public  reports. 

As  will  be  discussed  later  in  this  book,  there 
are  strong  reasons  for  city  ownership,  quite  inde- 
pendent of  the  financial  side  ;  but  the  figures  of 
cost  here  given  will  interest  all  who  fear  that  city 
ownership  of  municipal  monopolies  is  not  and  can- 
not become  a  financial  success  in  this  country. 

The  tables  need  no  special  explanation,  but  may 
be  omitted  by  the  casual  reader. 


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262  MUNICIPAL   MONOPOLIES. 

SOME   TYPICAL   PLANTS. 

Ulgin,  prior  to  city  ownership  in  1890,  was  pay- 
ing $8,000  for  33  arcs  running  until  midnight,  or 
$242.42  per  arc;  but  in  1891  the  city  ran  77  arcs 
all  night  on  the  moonlight  schedule,  or  over 
one-third  more  hours,  for  $4,800  for  operating 
expenses,  or  $62.34  each,  plus  say  10  per  cent  of 
the  amount  then  invested,  $17,900,  for  interest 
and  depreciation.  This  would  make  the  total  cost 
at  that  time  from  $84  to  $90,  or  about  one-third  of 
what  the  city  had  been  paying ;  while  the  cost  in 
1896,  even  with  interest  and  depreciation,  was  only 
about  $72. 

Owing  to  a  miners'  strike,  the  cost  of  coal  per 
arc  light,  which  had  been  $8.80  in  Elgin  in  1896, 
was  $17.84  for  each  of  181  arc  lights  in  1897. 
Yet  the  entire  operating  expenses  per  light  only 
rose  from  $52.85  in  1896  to  $55.49  in  1897,  or  5 
per  cent;  while  the  hours  of  lighting  increased 
from  2,240  to  2,448,  or  9  per  cent.  Of  the  total 
cost  of  the  plant,  $27,000,  $17,000  was  spent  in 
1889.  Hence  5  per  cent  depreciation  would  re- 
duce the  nominal  value  of  the  plant  per  arc  light 
from  $149  to  about  $100,  on  which  to  compute 
fixed  charges  of  10  per  cent  to  12  per  cent.  The 
city  has  been  so  satisfied  with  its  success  that  it 
has  just  installed  an  incandescent  plant  for  parks 
and  public  buildings. 


LATEST  ELECTRIC  LIGHT  REPORTS.        263 

Bangor,  Me.,  if  it  had  charged  itself  5  per  cent 
depreciation  every  year  since  the  construction  of 
its  plant  in  1889,  would  have  charged  off  $12,- 
250  ;  but  it  has  not  been  obliged  to  pay  anything 
for  replacement  of  the  plant  until  this  year,  when 
it  is  spending  $4,800  in  exchanging  the  old 
dynamos  for  new  ones,  and  156  arc  lights  of 
2,000  c.  p.  for  231  new  lights  of  1,200  c.  p.  In 
1888  this  city  was  paying  $150  each  year  for 
24  arc  lights,  or  $3,600,  and  for  gas  and  oil  lights 
$5,400,  or  a  total  of  $9,000.  Now  the  operat- 
ing expenses  of  $6,000  plus  interest  and  depre- 
ciation at  10  per  cent  on  the  value  of  the  plant 
as  computed  by  allowing  5  per  cent  on  the  value 
for  depreciation,  amount  only  to  $8,275  a  year, 
or  $53  per  arc  light. 

No  allowance  is  made  by  Little  Rock,  Ark.,  for 
clerk-hire,  water,  or  ground  rent  of  station,  since 
these  were  not  increased  by  the  lighting-plant. 
The  writer  does  not  have  sufficient  data  to  appor- 
tion these  small  expenses,  but  they  would  probar 
bly  not  materially  change  the  comparison  in  the 
tables. 

One  of  the  city  officials  writes  :  "  Formerly  the 
city  paid  $12,000  annually  for  one-fifth  as  much 
lighted  territory,  and  one-fortieth  as  much  light." 
This  is  probably  an  exaggeration,  but  indicates 
the  sense  of  satisfaction  the  people  have  in  their 
public  plants. 


264  MUNICIPAL  MONOPOLIES. 

The  Topeka  plant  is  so  often  held  up  as  a  warn- 
ing against  public  ownership  —  use  being  always 
made  of  the  experience  of  the  plant  —  that  the  fol- 
lowing facts  from  a  careful  investigation  by  a 
recent  student  of  the  writer's,  Mr.  Henry  M. 
Thomas,  at  the  Kansas  State  Agricultural  Col- 
lege, are  here  given.1 

In  the  early  stage  of  development  of  electrical 
science  in  1887,  Topeka  made  the  natural  mistake 
of  selecting  a  poor  type  of  plant,  at  a  cost  of  about 
153,000,  after  deducting  a  contractor's  forfeit  of 
about  $2,500  for  failure  to  comply  with  the  con- 
ditions of  the  contract.  The  operating  expenses 
for  several  years  were  about  $6  a  month.  Fixed 
charges  of  5  per  cent  interest,  5  per  cent  sinking- 
fund,  and  f  per  cent  allowance  for  lo'st  taxes, 
raised  the  total  cost  to  about  $102  a  year  of  2,200 
hours,  coal  being  $2  a  ton,  and  the  candle-power 
2,000.  As  the  lowest  bid  received  when  the  plant 
was  built  was  $120  a  year,  and  as  the  prevailing 
price  even  now  in  cities  of  equal  size  in  that 
section  of  country  is  $100,  Topeka  was  fa""  from 
losing  by  her  enterprise. 

In  May,  1896,  the  plant  was  entirely  rebuilt 
with  modern  machinery  at  a  cost  of  $13,772,  mak- 
ing the  total  cost  of  the  plant  nearly  $67,000;  but 
the  yearly  allowance   of  5  per  cent  depreciation 

1  A  much  fuller  presentation  of  his  data  will  be  found  in  the 
Report  for  1898  of  the  Kansas  Bureau  of  Labor  Statistics. 


LATEST  ELECTRIC  LIGHT  REPORTS.        265 

from  Dec.  1,  1887,  until  the  renewal  of  the  plant, 
June  1,  1896,  amounted  to  $18,765.  Evidently 
3 1  per  cent  would  have  taken  care  of  the  depre- 
ciation due  to  use.  But  in  order  to  reduce  the 
value  of  the  plant,  June  1,  1898,  to  what  it  would 
cost  to  duplicate  as  a  merely  physical  plant  — 
about  $45,000,  according  to  the  estimates  of  the 
capable  superintendent  and  of  an  outside  electri- 
cal engineer  —  5  per  cent  allowance  for  deprecia- 
tion is  necessary.  This  would  reduce  the  value 
of  the  plant  in  1898  to  843,327.  Money  will 
soon  have  to  be  spent  for  extensions  to  keep  up 
with  the  growth  of  the  city. 

The  operating  expenses  in  1896-1897  were  140.68 
per  arc,  and  in  1897-1898  were  $41.48,  owing  to 
extensive  repairs  on  the  boilers.  Fixed  charges 
would  bring  up  the  total  cost  to  $61.48,  or  much 
less  than  in  cities  of  similar  size  with  private 
ownership  in  any  part  of  the  country,  allowance 
being  made  for  difference  in  the  price  of  coal, 
hours  operated,  etc. 

In  the  words  of  Mr.  Thomas  (1st  Lieutenant, 
Company  Twenty-Second  Kansas  Volunteers),  — 

"  The  standing  charge  that  political  influence  and  job- 
bery does  and  will  destroy  the  efficiency  of  every  city- 
owned  enterprise,  does  not  seem  to  be  substantiated  by  the 
record  of  this  plant.  Although  the  tenure  of  employment 
of  the  less  skilled  workers  is  perhaps  largely  regulated  by 
political   considerations,  yet   the  engineer  and  the  chief 


266  MUNICIPAL   MONOPOLIES. 

linesman  and  trimmer,  who  is  reputed  to  be  especially 
expert,  as  well  as  the  superintendent,  have  each  had  steady 
and  permanent  employment  for  a  number  of  years,  even 
through  different  political  administrations  in  the  city.  In 
fact,  the  present  superintendent,  who  is  a  Republican,  was 
appointed  by  a  mayor  who  was  a  Democrat.  It  is  true, 
however,  that  the  absence  of  attempts  on  the  part  of  politi- 
cal workers  to  secure  the  position  of  superintendent  might 
be  accounted  for  by  the  fact  that  his  salary  is  so  extremely 
low,  $1,000  per  year,  as  to  offer  few  inducements  for  their 
efforts. 

"  The  plant,  as  conducted  at  present,  is  a  credit  to  the 
municipality,  and  is  the  pride  of  the  citizens.  Thorough 
and  extensive  efforts  to  find  some  complaints  or  evidence 
of  dissatisfaction  with  the  plant  were  entirely  futile.  The 
citizens  are  a  unit  in  their  expression  of  satisfaction  with 
city  ownership  under  a  management  as  efficient  as  the 
present  one." 

The  mayor  of  Fairfield,  la.,  writes  that  this,  the 
oldest  city  electric-light  plant  in  this  country,  and 
probably  in  the  world,  originally  cost  $6,000.  It 
was  built  by  a  private  company  in  1880,  and  was 
purchased  by  the  city  in  1882.  No  commercial 
lighting  is  done.  There  are  six  arc  lights  on  a 
tower,  and  twelve  others  which  are  operated  in 
connection  with  the  city  water-works  ;  but  the  cost 
is  kept  separate.  For  light  all  night  on  dark 
nights,  with  coal  at  about  f'2  a  ton,  these  few  lights 
have  cost  the  city  on  the  average  only  $64  yearly 
per  lamp,  including  the  average  expense  of  all 
renewals,  but   not,  of   course,  the  fixed  charges. 


LATEST  ELECTRIC  LIGHT  REPORTS.        207 

An  allowance  of  6  per  cent  interest  would  only 
add  #20  a  light.  The  plant,  says  the  mayor,  has 
proven  "very  satisfactory"  to  the  people. 

The  universally  admitted  success  of  public  own- 
ership in  Allegheny,  Pa.,  is  largely  due  to  the  choice 
of  an  admirable  chief,  Mr.  D.  Hunter,  who  is  ap- 
pointed Superintendent  of  the  Bureau  of  Public 
Lighting  by  the  Director  of  Public  Works,  without 
the  necessity  of  approval  by  the  Council;  and  is 
given  similar  discretion  over  the  appointment  of 
subordinates,  untrammeled  by  the  spoils  system. 

The  total  output  in  1897-1898  at  Allegheny 
was  2,959,072  kilowatts,  of  which  23.3  per  cent 
was  used  in  running  5,373  incandescent  lights  in 
various  public  buildings.  The  operating  expense 
per  thousand  watts  has  been  gradually  falling.  It 
was  2.73  cents  in  1895-1896,  2.44  cents  in  1896- 
1897,  and  2.41  cents  in  1897-1898;  or,  put  in 
another  way,  the  average  operating  expenses  per 
year  have  fallen  from  $61.24  in  1895-1896  to 
149.56  in  1897-1898.  In  the  latter  year  the 
charge,  with  interest  and  depreciation  at  five  per 
cent  each,  was  only  $71.78  at  Allegheny,  and  about 
the  same  at  Wheeling.  In  the  table  the  expenses  of 
the  arc  lights  only  are  given  at  Allegheny.  The 
operating  expenses  of  the  incandescent  lights 
1897-1898  were  2.59  cents  per  kilowatt.  The 
1,146  arc  lights  in  use  in  March,  1898,  had  cost 
$267,302.26,  or  $233.34  each.    The  incandescents, 


268  MUNICIPAL   MONOPOLIES. 

equivalent  to  5,373  of  16  c.  p.  each,  had  cost  $91,- 
600.24,  or  $17.05  each.  If  account  be  taken,  how- 
ever, of  only  the  actual  number  of  incandescents, 
5,196,  some  of  which  are  of  higher  candle-power 
than  16,  the  cost  would  be  about  $17.63  per  in- 
candescent light.  About  $100,000  was  obtained 
for  extensions  of  the  plant  in  1895-1896,  by  sell- 
ing 4  per  cent  bonds  at  a  premium  of  106,  so  that 
the  allowance  in  the  tables  of  5  per  cent  interest 
is  too  high  in  this  plant,  as  of  course  in  many 
others  in  large  cities  where  bonds  are  readily  sold 
at  par  at  4  per  cent  and  sometimes  at  3£  per 
cent. 

Prior  to  the  construction  of  the  Allegheny  plant 
in  1890,  the  city  had  been  paying  $180  each  for  15 
to  18  arc  lights  from  a  private  company ;  but  of 
course  for  a  large  contract  with  the  cheapened  costs 
of  recent  years,  even  under  private  ownership  this 
charge  would  have  been  greatly  reduced.  Yet 
Pittsburg,  Pa.,  across  the  river  from  Allegheny, 
was  paying  $195  a  year  per  arc  light  as  late  as 
1895,  and  has  been  paying  $96  since  then. 

Detroit,  Mich.,  paid  $130.38  per  light  in  1892 
to  a  private  company  for  1,168  arc  lights  ;  $128.87 
in  1893;  $132.41  in  1894  for  1,279  lights;  and 
there  was  little  prospect  of  reduction  unless  a  ten 
years'  contract  was  given,  in  which  case  a  bid  for 
$102.20  was  made  in  1893.  The  cost  in  1897- 
1898,  under  public  ownership,  including  interest 


LATEST  ELECTRIC  LIGHT  REPORTS.        269 

paid  on  the  lighting-bonds  of  4  per  cent,  the  taxes 
of  $2.02  per  lamp  paid  by  the  late  contractors,  and 
depreciation  of  5  per  cent  on  the  value  of  the 
plant  as  it  was  in  June,  1897,  after  deducting  the 
depreciation  of  the  previous  year,  was  under  $85. 
The  public  report  for  1897-1898  gives  the  operat- 
ing expenses  as  151.85,  and  the  fixed  charges  as 
31.65.  To  be  sure,  this  report  computes  deprecia- 
tion at  only  3  per  cent,  but,  on  the  other  hand,  es- 
timates it  upon  the  original  cost  of  the  plant  of 
about  $390  per  arc,  instead  of  upon  the  true  value 
of  about  $350  per  arc,  as  it  must  have  been  at  the 
beginning  of  the  fiscal  year,  after  deducting  pre- 
vious depreciation. 

The  report  also  estimates  the  taxes  that  a  pri- 
vate company  would  put  at  $4.35  per  lamp,  al- 
though the  late  contractors  paid  only  $2.02. 

Interest,  also,  is  computed  at  4  per  cent  in  the 
report;  although  $600,000  of  4  per  cent  bonds 
were  sold  for  building  the  plant  for  $627,540, 
making  the  real  interest  only  3.84  per  cent. 

The  report  is  very  misleading,  also,  in  its  state- 
ment that  a  contract  could  probably  now  be  made 
with  a  private  company  for  light  at  $90  a  year; 
since  this  ignores  the  fact  that  the  city  could  not 
have  delayed  making  a  contract  until  now  with- 
out paying  from  $120  to  $135  per  year,  and  could 
not  get  a  $90  contract  now,  probably,  without  giv- 
ing it  for  five  or  ten  years,  during  which  time  the 


270  MUNICIPAL  MONOPOLIES. 

cost  of  public  lighting  will  almost  certainly  fall 
materially.  Operating  expenses,  in  fact,  have 
already  fallen  from  3.979  cents  per  1,000  watts, 
Jan.  1  to  June  30,  1896,  to  3.038  cents  June  30, 
1897-1898.  Put  in  another  way,  the  yearly  operat- 
ing expenses  per  arc  light  fell  from  $64.19  during 
1896-1897  to  151.85  the  following  year. 

It  may  be  noted  that  the  expenses  of  the  De- 
troit plant  include  a  premium  for  insurance  on 
the  boilers  and  for  damage  to  person  or  property 
that  may  be  caused  by  an  explosion.  During 
1895-1896,  and  possibly  since  then,  the  operating 
expenses  included  the  full  pay  of  four  men,  em- 
ployees of  the  city,  partially  or  totally  disabled  by 
accident,  together  with  the  medical  and  surgical 
attendance  they  required.  These  items  were  cov- 
ered in  the  report  under  the  head  of  labor  and 
management. 

Equally  vital  to  a  proper  understanding  of  the 
famous  Detroit  company  is  a  knowledge  of  why 
the  cost  of  construction  was  so  great.  In  order 
that  Detroit  might  be  equipped  with  conduits  of 
sufficient  size  to  include  all  kinds  of  wires,  and  to 
secure  other  advantages  not  directly  connected 
with  lighting,  the  cost  of  construction  up  to  July 
1,  1895,  attained  the  high  figure  of  164,845.84  for 
incandescent  lights  for  public  buildings,  or  $19.03 
per  light,  and  $706,451.89  for  street  arcs,  or  $390 
per  arc.     This  does  not  include  the  cost  of  about 


LATEST  ELECTRIC  LIGHT  REPORTS.       271 

40  arcs  and  about  500  incandescent  lights  in  an 
island  park  opposite  the  city. 

While  not  criticising  the  cost  of  construction, 
Mr.  Dow,  the  first  superintendent  of  the  plant, 
has  given  the  writer  figures  showing  how  a  differ- 
ent location  of  the  plant  and  less  expense  for  con- 
duits would  have  enabled  a  plant  equally  efficient 
for  purely  lighting-purposes  to  have  been  con- 
structed for  -191,470.95  less.  This  would  leave 
the  necessary  cost  of  construction  about  $345  per 
arc,  and  about  $17  per  incandescent  light.  This 
seems  reasonable  from  another  point  of  view.  The 
last  report  of  the  plant  shows  $76,144.32  invested 
in  conduits,  or  $43.66  per  arc.  Of  this  only  one- 
fourth  is  used  by  the  electric-light  plant.  One- 
half  of  the  poles  also  (see  Report,  page  8)  are  used 
by  the  police  and  fire  departments,  and  by  private 
commercial  lighting,  telephone,  and  street-railway 
companies.  It  would  not  be  surprising  if  a  close 
investigation  should  reveal  the  fact,  that,  had  not 
the  Detroit  public  lighting-plant  been  built  with  a 
view  (wisely,  no  doubt)  to  these  other  public  pur- 
poses, the  cost  of  construction  per  arc  light  would 
have  been  under  $300. 

If  space  permitted,  it  would  be  very  interesting 
to  describe  the  efforts  of  private  electric  plants, 
not  only  in  Detroit  but  elsewhere,  to  prevent  that 
city  from  securing  even  a  street-lighting  plant  in 
1894.     Only  the  persistence  of  the  then  mayor  of 


272  MUNICIPAL  MONOPOLIES. 

Detroit,  Hon.  H.  S.  Pingree,  secured  the  present 
plant,  by  which,  as  we  have  seen,  the  average 
price  of  street-lighting  has  been  reduced  one-sixth, 
and  by  which  an  even  greater  reduction  could 
occur  in  private  lighting,  if  the  plant  were  allowed 
to  enter  that  field. 

The  advantages  of  public  ownership  in  a  well- 
managed  plant,  even  when  there  is  no  apparent 
reduction  in  price  after  all  allowance  is  made  for 
depreciation,  interest,  etc.,  were  admirably  expressed 
by  Mr.  Dow  in  the  Western  Electrician  (Feb.  22, 
1896),  as  follows :  — 

"  To  sum  it  up  :  If  a  municipal  plant  is  operated  and 
managed  in  good  running  order,  at  such  a  figure  as,  added 
to  interest,  sinking-fund,  and  lost  taxes,  will  equal  the 
contract  cost  of  lighting,  there  is  a  gain  to  the  taxpayers 
in  municipal  lighting,  directly  by  reason  of  ownership  of  a 
marketable  asset,  free  from  incumbrance  at  the  winding  up  of 
the  sinking-fund ;  and  indirectly  by  the  retention  of  the  depre- 
ciation fund  in  the  active  business  of  the  taxpayers." 

The  italics  are  ours.  In  other  words,  Detroit 
may,  from  a  bookkeeping  point  of  view,  compute 
the  cost  of  her  lights  as  about  $85  a  year,  in  com- 
parison with  about  $130  under  private  ownership, 
or $162.20  promised  on  a  ten-year  contract;  while, 
looking  forward  to  a  time  20  or  30  years  hence, 
when  the  plant  will  be  entirely  paid  for  from  a  5 
per  cent  yearly  depreciation  fund,  so  that  interest 
and  depreciation  will  no  longer  have  to  be  reck- 


LATEST  ELECTRIC  LIGHT  REPORTS.        273 

oned.  The  city  may  also  consider  the  cost  not  as 
$85  a  year,  but  as  say  $65  a  year,  or  whatever  the 
running-expenses  and  interest  may  be,  and  $20 
more,  which  may  be  kept  in  the  pockets  of  the 
taxpayers  until  needed  for  expensive  renewals  10 
or  20  years  hence. 

Hamilton,  O.,  had  succeeded  admirably  with  her 
city  gas-works  since  1890,  and  constructed  an 
electric-light  plant  in  1895,  but  instead  of  placing 
it  under  the  control  of  a  board  of  three  commis- 
sioners specially  elected  for  the  purpose,  left  it  in 
charge  of  the  city  council,  by  whom  it  seems  to 
have  been  inefficiently  managed  for  a  while  ;  but 
detailed  information  was  not  sufficiently  preserved 
by  those  in  charge  to  permit  any  full  examination  of 
the  matter.  Feb.  1,  1897,  however,  the  plant  was 
placed  in  charge  of  Mr.  W.  N.  Gray,  who  appears 
to  have  been  an  excellent  electrician  and  business 
manager.  The  total  operating  expenses  per  kilo- 
watt in  1897  were  only  3.41  cents;  and  an  allow- 
ance of  10  per  cent  for  interest  and  depreciation 
would  add  1\  cents  more,  or  a  total  of  about  5| 
cents.  Since  many  consumers  in  Hamilton  secure 
discounts  by  using  large  amounts,  or  because  they 
pay  by  tile  month  instead  of  by  meter,  the  average 
charge  is  only  6  cents  per  thousand  watts.  This 
may  well  be  contrasted  with  the  common  charge 
of  10  to  15  cents  by  private  companies  in  cities 
of  this  size.     Small  consumers  in  this  city  paid  8 


27  \  MUNICIPAL  MONOPOLIES. 

cents  per  thousand  watts.  The  Hamilton  plant 
nearly  doubled  its  receipts  from  commercial  light- 
ing in  1897,  and  showed  in  every  way  some  of  the 
best  financial  results  in  the  country.  Unfortu- 
nately, however,  the  city  belongs  to  that  pitiable 
class  which  seems  fortunately  to  include  less  than 
one-third  of  the  seventy-four  public  plants  quoted 
in  these  tables,  which  allows  "  politics  "  to  handi- 
cap the  success  of  public  management.  A  change 
of  city  government  in  the  spring  of  1898  has  been 
followed  by  the  resignation  of  the  capable  superin- 
tendent, and  by  poor  management  that  must  be 
checked  soon  if  the  success  of  the  plant  in  1897  is 
to  continue. 

Jacksonville,  Fla.,  is  one  of  the  most  conspicuous 
examples  of  success  in  municipal  ownership.  Not 
only  is  the  net  cost  of  its  122  public  arc  lights 
reduced  by  good  management  and  by  the  receipt 
from  commercial  lighting  to  less  than  one-fourth 
of  what  the  city  had  been  paying  a  private  com- 
pany, but  the  commercial  rates  of  the  public  plant 
have  been  reduced  one-half,  forcing  a  considerable 
reduction  in  the  prices  of  two  private  electric-light 
plants  in  the  city,  and  of  gas.  These  reductions 
alone  are  officially  estimated  to  equal  a  yearly 
profit  to  the  consumers  of  light  of  two-thirds  the 
cost  of  the  public  plant. 

For  many  years  the  Chicago  electric-light  plant 
partook  of  the  inefficiency  characteristic  of  much 


LATEST  ELECTRIC  LIGHT  REPORTS.        275 

of  the  work  done  by  the  city  council  of  that  city. 
It  has  been  customary  among  private  electricians 
to  consider  this  plant  a  grand  illustration  of  muni- 
cipal failure,  as  bad  in  its  way  as  the  Philadelphia 
gas-works ;  but  a  careful  examination  reveals  a 
somewhat  different  situation,  especially  the  past 
year.  The  plant  was  begun  in  1887,  and  gradu- 
ally increased  until  1,321  street-lights  were  in 
operation  in  1897.  The  usual  running-expenses 
prior  to  the  year  last  mentioned  were  reported  as 
about  196  per  light.  The  addition  of  a  few 
omitted  items,  such  as  water,  obtained  free  from 
the  city  mains,  and  some  office  expenses  and  re- 
pairs, would  bring  up  this  amount  to  somewhat 
over  $100,  according  to  the  present  able  head  of 
the  department.  In  order  to  reduce  the  cost  of 
construction  and  of  extensions  to  that  which  the 
present  superintendent  considers  the  present  cost 
of  duplication  of  about  $400,000,  or  about  $300  a 
light,  it  is  necessary  to  compute  depreciation  at  15 
per  cent  a  year  prior  to  January  1893,  and  at  7i  per 
cent  subsequently.  This  would  mean  a  total  cost, 
including  interest  at  4  per  cent,  of  about  $175  a 
year  prior  to  1894,  and  of  about  $135  a  year  from 
then  until  1897.  The  city,  however,  was  obliged 
to  pay  for  the  considerable  number  of  arc  lights 
rented  from  a  private  company  $175  a  year  prior  to 
1893,  and  $137.50  that  year.  Up  to  that  time, 
therefore,  there  was  not  much  difference  between 


276  MUNICIPAL  MONOPOLIES. 

private  and  public  ownership  as  regards  price,  un- 
less it  be  true,  as  claimed  by  the  city  officials,  that 
the  price  was  reduced  by  private  companies  in  or- 
der to  compete  with  the  city  plant.  For  this  or 
other  reasons  the  city  was  able  to  buy  about  500 
arc  lights  from  private  companies  in  1898  for 
$107.50;  although  the  Edison  company  charges 
$137.50  per  arc  light  for  69  lights,  and  exacts  from 
private  consumers  $108  a  year  for  lights  burning 
only  until  midnight. 

Philadelphia  in  1897  paid  $109  to  $146,  or  on 
the  average  about  $126,  Boston,  $127.75,  and  New 
York,  for  lights  of  only  1,200  c.  p.,  from  $146  to 
$182.50,  while  coal  was  nearly  as  cheap  in  Phila- 
delphia and  New  York  as  in  Chicago.  At  least  the 
difference  in  the  price  of  coal  did  not  justify  $5 
difference  in  the  charge  per  arc  light  per  year. 
These  figures  would  seem  to  indicate  that  the  re- 
duced price  of  private  lighting  in  Chicago  may 
have  been  due  to  the  competition  of  the  public 
plant ;  but  however  that  may  be,  the  city  plant  seems 
to  have  been  wastefully  managed,  and  not  equipped 
with  the  best  machinery,  as  shown  by  a  comparison 
of  items  of  cost  with  those  of  the  modern  plants  at 
Allegheny  and  Detroit. 

For  example,  in  1896  the  cost  of  labor  in  the 
Chicago  plant  was  $51.43,  in  the  Detroit  plant 
$31.65,  and  in  the  Allegheny  plant  $32.77  per 
arc  light.     The  cost  of  coal,  likewise,  which  was 


LATEST  ELECTRIC  LIGHT  REPORTS.        277 

slightly  under  $2  a  ton  in  Chicago,  and  82.22  in 
Detroit,  was  about  825  per  arc  light  in  the  former 
city,  and  only  $9.29  in  the  latter.  The  difference 
was  no  doubt  due  in  part  to  the  location  of  the 
Chicago  plants,  which  required  the  hauling  of  coal 
by  wagon,  and  to  the  fact  that  three  moderate- 
sized  plants,  considerably  out  of  date,  were  used 
in  Chicago  to  do  the  work  done  by  one  large  and 
thoroughly  modern  plant  in  Allegheny  and  De- 
troit. Although  there  is  no  proof  at  hand,  it  is 
quite  likely,  also,  that  the  spoils  system  handi- 
capped the  Chicago  plant  more  than  it  did  the 
others. 

With  the  inauguration  of  civil-service  reform, 
and  the  appointment  of  a  new  electrician,  Mr. 
Edward  B.  Ellicott,  in  the  summer  of  1897,  a  re- 
markable change  has  taken  place.  During  the 
first  six  months  of  1897  the  average  operating 
expenses  of  1,260  arc  lights  of  2,000  c.  p.,  burning 
1,90-1  hours,  were  $46.73,  or  2.45  cents  per  hour. 
During  the  first  six  months  of  1898  the  average 
operating  expenses  for  1,460  arc  lights,  burning 
1,960  hours,  were  $35.91,  or  1.83  cents  per  hour, 
a  reduction  of  one-fourth.  This  means  that  the 
operating  expenses  for  1898  will  be  about  $70, 
and  the  chief  estimates  that  in  1899  improvements 
and  extensions  will  reduce  this  cost  to  $60.  In- 
terest and  depreciation  will  only  raise  the  total 
cost  to  about  $90. 


278  MUNICIPAL  MONOPOLIES. 

The  Chicago  city  plant  has  in  operation  in  the 
fall  of  1898,  2,500  arc  lights,  and  is  to  add  500 
more  during  the  winter.  The  largest  and  most 
recently  equipped  part  of  the  Chicago  plant,  cen- 
tering at  Halsted  Street,  had  operating  expenses 
of  only  $32.38  during  the  first  half  of  1898,  when 
it  was  not  running  up  to  its  full  capacity,  as  it 
will  soon  do.  Chicago  no  longer  needs  to  apolo- 
gize for  her  city  lighting-plant,  and  may  yet  be 
able  to  rival  Detroit,  Allegheny,  South  Norwalk, 
Conn.,  and  other  conspicuous  illustrations  of  mu- 
nicipal success. 

The  great  Chicago  Edison  Company  sold  18,- 
238,000  kilowatts  in  its  fiscal  year  1897-1898  for 
$1,661,863.  This  would  mean  9.112  cents  per 
kilowatt,  or  about  $175  for  the  same  number  of 
kilowatts  as  are  yearly  burned  in  a  single  Chicago 
street-lamp. 

It  may  be  claimed  that  it  costs  more  to  distrib- 
ute a  thousand  watts  through  incandescent  lights 
than  through  arc  lights  ;  but  since  the  present  cost 
of  producing  a  thousand  watts  for  street  lights, 
including  even  interest  and  depreciation,  is  under 
5  cents  per  1,000  watts,  and  inasmuch  as  the  fixed 
charges  for  conduits,  land,  etc.,  would  not  have  to 
be  proportionately  increased  with  the  assumption 
by  city  plants  of  commercial  lighting,  there  is  good 
reason  to  accept  as  not  a  very  great  exaggeration 
the  positive  statement  to  the  writer  of  the  previ- 


LATEST  ELECTRIC  LIGHT  REPORTS.       279 

cms  chief  of  the  Chicago  city  plants,  Mr.  Barrett, 
that  if  Chicago  were  allowed  by  State  law  to  sell 
electric  light  to  private  consumers  the  charge  now 
exacted  from  them  could  be  cut  in  two. 

COST  OF   CONSTRUCTION   PER   ARC. 

In  Table  XXVIII.  is  given  the  present  esti- 
mated value  or  cost  of  duplication  per  arc  light  in 
29  public  plants  that  have  no  commercial  lights. 
These  costs  are  in  most  cases  the  costs  of  construc- 
tion, less  5  per  cent  annual  depreciation.  In  a  few 
cases  —  such  as  Chicago  —  a  higher  rate  of  depre- 
ciation in  the  earlier  years  of  the  plant  was  found 
necessary,  as  already  explained,  in  order  to  reach 
the  present  value  of  the  physical  plant  as  estimated 
by  the  superintendents.  The  average  present  value 
per  arc  in  these  plants,  which  average  283  arcs 
each,  is  only  $195.05.  Valuable  data  upon  the 
cost  of  construction  of  lighting-plants  will  be  found 
in  Buckley's  "  Electric  Lighting,"  and  in  Professor 
Parsons's  article  in  the  Arena,  September,  1895. 

TABLE    XXVIII.       Cost  of  Construction. 

Pt  , ,_  Cost  per      Number 

rLACE-  arc.  of  Arcs. 

Elgin,  111 $192.30  156 

Bay  City,  Mich 122.00  209 

Little  Rock,  Ark 100.00  212 

Easton,  Pa 154.20  141 

Batavia,  N.Y 250.30  103 

Dunkirk,  N.Y 264.10  75 

Meadville,  Pa 183.50  109 


280  MUNICIPAL   MONOPOLIES. 

„,  .  __  Cost  pee      Number 

rI-A<-K-  ABC.  OF  A  ECS. 

Bowling  Green,  Ky $140.00  72 

Bloomington,  111 270.40  307 

Frederick,  Md 230.03  76 

Newark,  0 177.00  226 

Wheeling,  W.  Va 231.60  468 

Aurora,  111 161.50  206 

Chicago,  111 301.82  1,321 

Detroit,  Mich 338.00  1,564 

South  Park,  Chicago 289.60  490 

Allegheny,  Pa 223.20  1,146 

Carthage,  0 333.30  45 

Paducah,  Ky 141.70  120 

Decatur,  111 158.40  156 

Columbus,  Ind 134.20  82 

Morgan  Park,  111 100.00  40 

St.  Joseph,  Mo 113.10  355 

Marion,  Ind.    .    '. 203.40  118 

Painesville,  0 147.10  85 

Sherman,  Tex 200.00  64 

Titusville,  Pa 126.60  114 

St.  Charles,  Mo 187.50  80 

Topeka,  Kan 187.50  264 

Averages $195.05  283 

In  the  12  public  plants  of  2,000  c.  p.,  and  mostly 
of  large  size,  that  report  the  cost  of  coal  per  arc 
light  as  well  as  per  ton,  the  average  cost  was  12.05 
per  ton,  and  $.12.43  per  arc  light,  as  shown  in 
Table  XXIX.  The  average  number  of  hours 
burned  by  these  lights  was  3,029.  This  would 
indicate  that  a  difference  of  one  dollar  per  ton  in 
the  cost  of  coal  would  make  a  difference  of  $6.06 
per  arc  light.  With  smaller  plants,  using  smaller 
boilers  and  engines,  the  difference  is  likely  to  be 
nearer  $10. 


LATEST  ELECTRIC  LIGHT  REPORTS.        281 


TABLE   XXIX. 

Coal  Coal  No.  ok 

Place.                                         per  pee  Hours 

Ton.  Arc.  Burned. 

Elgin,  111 $1.93  $8.80  2,240 

Wheeling,  W.  Va.  (about)  ...          .85  6.48  4,000 

Aurora,  111 1.75  7.49  2,527 

Chicago,  111 4.25  27.12  4,066 

Detroit,  Mich 2.22  9.29  3,791 

South  Park,  Chicago 3.39 i  16.00  2,133 

Allegheny,  Pa 90  10.96  4,105 

Topeka,  Kan 2.00  12.10  2,195 

Bay  City,  Mich 1.75  10.98  2,623 

Little  Rock,  Ark.  ($1.90  to  $3.20), 

say 2.25  11.20  2,453 

Batavia,  N.Y 1.92  12.63  3,407 

Dunkirk,  N.Y 1.45  2  16.08  2,809 

Averages $2.05    $12.43  3,029 


THE   SPRINGFIELD,   DLL.,   EXPERIMENT. 

Those  cities  which  are  unable  to  secure  suitable 
legislation  for  city  ownership,  or  which  are  not 
otherwise  prepared  for  such  an  undertaking,  can 
obtain  much  encouragement  from  the  example  of 
Springfield,  111.,  in  case  as  much  public  spirit  can 
be  found  among  prominent  citizens  as  was  de- 
veloped there. 

In  1894  that  city  was  paying  $137  per  annum 
for  arc  lights  of  2,000  c.  p.,  that  were  burning  on 
moonlight  schedule  ;  i.e.,  during  dark  nights.  This 
company  controlled  the  gas  company,  and  refused 
to  offer  lights  for  less  than  $120  in  order  to  secure 

1  Oil  equivalent  to  that  price  for  coal. 

'  Oil  was  used  computed  as  equivalent  to  coal  at  $1.45. 


282  MUNICIPAL  MONOPOLIES. 

another  contract.  The  company,  in  fact,  presented 
a  signed  statement  with  some  specifications,  show- 
ing that  the  cost  of  the  service  was  $117.  The 
City  Council  looked  into  the  question,  but  found 
that  it  was  handicapped  by  the  Constitution  of 
the  State,  which  limits  indebtedness,  Springfield 
having  reached  tins  maximum  limit.  The  legis- 
lature had  not  then  given,  and  has  not  now  given, 
permission  to  Illinois  cities  to  sell  electric  light  to 
private  consumers.  Whereupon  sixty  citizens  or- 
ganized a  company,  specified  the  necessary  stock, 
required  a  franchise  from  the  city,  and  proposed 
to  administer  the  affairs  of  the  company  without 
pay.  The  old  company  had  furnished  147  arc 
lights  of  2,000  c.  p.,  aggregating  294,000  candles, 
232  incandescent  lights  of  20  c.  p. ,  aggregating 
4,640  candles,  and  402  gas  lights  of  nominal  18 
candles,  aggregating  7,236  candles,  or  a  total  of 
305,876  candles,  for  $24,000.  The  new  company, 
the  Capital  Electric  Light  Company,  offered  for 
the  same  money,  $24,000,  to  furnish  3,000  arc 
lights  of  2,000  c.  p.,  aggregating  600,000  candles, 
or  98  per  cent  more  light.  This  would  be  $113.33 
per  arc  light.  The  company  also  agreed  to  light 
the  city  hall,  police  headquarters,  and  engine- 
houses  free  of  charge,  a  service  which  now  re- 
quires over  800  incandescent  lights,  though  the 
city  makes  no  charge  for  water. 

Of  this  $113.33  per  arc  light  received  from  the 


LATEST  ELECTRIC  LIGHT  REPORTS.        283 

city  each  year,  $53.33  was  to  be  applied  in  paying 
for  the  plant.  As  soon  as  paid  for,  this  was  to 
become  the  property  of  the  city  without  any  pay- 
ment, thus  reducing  the  cost  to  at  least  $60.  The 
old  company  thereupon  offered  to  do  the  work  for 
$90  per  arc;  although  it  had  previously  insisted 
that  the  cost  was  $117,  and  in  1897  sought  in  vain 
a  contract  from  the  city  at  $68.  After  consider- 
able litigation,  brought  on  by  enemies  of  the  enter- 
prise, this  Capital  Electric  Light  Company  began 
operations.  No  contract  with  the  city  was  made, 
because  a  contract  for  the  five  or  more  years  neces- 
sary to  pay  for  the  plant  could  not  be  legally 
effected ;  but  it  was  agreed  that  so  long  as  the  city 
paid  $113.33  per  light  per  annum,  all  profits  arising 
from  the  administration  of  the  company's  affairs 
should  be  applied  in  the  liquidation  of  the  com- 
pany's indebtedness  ;  and  when  the  profits  equaled 
the  cost  of  the  plant  the  city  might  take  it,  but 
the  city  would  forfeit  all  its  rights  whenever  it 
ceased  to  use  the  company's  lights.  Thereupon 
the  60  citizens  subscribed  $1,000  each,  and  placed 
the  stock  subscriptions  in  the  hands  of  a  treasurer 
to  be  held  as  collateral  security  for  moneys  bor- 
rowed from  the  banks  of  the  city  for  constructing 
the  plant.  As  these  citizens  were  too  actively 
engaged  in  their  own  business  enterprises  to  man- 
age the  plant,  they  made  a  contract  at  the  start 
with  two  practical  electricians  to  furnish  arc  lights 


284  MUNICIPAL  MONOPOLIES. 

at  $60  per  light  per  annum,  this  to  include  7  per 
cent  interest  on  the  cost  of  the  plant.  The  banks 
had  charged  7  per  cent  for  their  loans  to  the  com- 
pany. For  the  lighting  of  the  city  buildings  the 
lessees  are  paid  by  the  stockholders  6  cents  per 
watt  hour.  This  amounts  to  about  $1,800  a  year 
of  free  gift  to  the  city. 

The  lessees  are  not  tired  of  their  contract; 
although  after  paying  7  per  cent  interest,  they 
have  only  about  $43  per  arc  left  for  operating 
expenses,  and  the  plant  runs  between  2,800  and 
3,000  hours  per  year. 

The  Capital  Electric  Company  turns  over  to 
the  lessees  75  per  cent  of  the  commercial  lighting 
receipts,  using  as  much  as  is  necessary  of  the  bal- 
ance to  pay  for  the  cost  of  collecting.  Any  surplus 
over  this  25  per  cent  of  commercial  receipts  applies 
to  the  extinction  of  the  debt.  Commercial  charges 
are  40  per  cent  less  in  Springfield  than  when  the 
new  company  started  in  June,  1895.  The  Hotel 
Nicholas  had  been  paying  $2,800  a  year  for  gas. 
It  lighted  with  electricity  from  the  new  company 
for  $1,200.  As  it  now  has  a  plant  of  its  own  for 
heating,  elevators,  baths,  etc.,  the  hotel  makes  its 
own  electric  light  for  still  less  cost. 

The  plant  has  been  largely  extended.  It  fur- 
nishes 38  arc  lights,  paid  for  by  the  railroads  at 
the  street  crossings,  and  a  growing  number  of  pri- 
vate lights.      The   total  cost  of  the  plant  up  to 


LATEST  ELECTRIC  LIGUT  REPORTS.        285 


June  1,  1898,  was  $111,130.40,  of  which 
085.56  was  for  the  municipal  lighting.  The  com- 
pany had  credited  the  city  with  profits  of  $60,- 
195.65,  leaving  a  net  debt  of  150,934.75,  which 
will  be  entirely  canceled  in  two  or  three  years, 
according  to  the  amount  of  further  extensions  that 
may  be  constructed  meantime. 

In  1900  or  1901  the  city  will  come  into  posses- 
sion, free  of  debt,  of  a  plant  that  will  nt)t  only 
manufacture  arc  light  for  about  $40  a  year  per  arc, 
but  which,  even  at  the  present  greatly  reduced 
rates  for  commercial  lighting,  will  receive  enough 
therefrom  to  cover  all  the  expense  of  street-light- 
ing. 

The  only  doubtful  question  is  whether  the  hith- 
erto successful  resistance  of  electric-light  com- 
panies to  the  passage  of  a  law  permitting  munici- 
pal commercial  lighting  will  be  overcome,  so  as  to 
permit  the  city  really  to  enter  upon  its  inheritance. 


APPENDIX. 

Validity  of  Electric  Light  Comparison. 

By  F.  A.  C.  PERRINE,  D.  Sc. 

Professor  of  Electrical  Engineering ,  Leland  Stanford  University , 
i  Palo  Alto,  Cal. 


Whenever  the  study  of  a  problem  in  mathematics,  natu- 
ral science,  or  economics  leads  investigators  to  many  different 
and  contradictory  conclusions,  we  must  not  only  search  in 
the  data  used  in  order  to  obtain  an  explanation  of  the  vary- 
ing conclusions,  but  also  must  learn  whether  there  is  agree- 
ment in  the  fundamental  principles  applied  to  the  solution. 
No  collection  of  accurate  data  can  lead  to  an  accurate  solu- 
tion of  any  problem,  if  the  data  are  obtained  in  such  a 
manner  as  not  to  cover  all  the  points  at  issue.  Under  such 
circumstances,  contradictory  conclusions  are  found,  not,  as 
is  often  thought,  on  account  of  the  mental  attitude  of  the 
investigators,  but  rather  from  a  lack  of  consideration  of 
the  principles  involved  in  the  solution. 

No  problem  in  economics  has  yielded  more  discordant 
solutions  than  has  the  problem  of  the  comparative  value  of 
municipal  and  private  ownership  in  Electrical  undertakings. 
Attempts  have  been  made  to  explain  these  discordant  solu- 
tions by  reference  to  the  comparative  fullness  of  data  used 
by  the  different  investigators,  but  instances  are  not  infre- 
quent of  opposite  conclusions  from  a  consideration  of  the 
same  statistics.  In  order  to  explain  this,  therefore,  we 
should  attempt  to  ascertain  the  basis  of  comparison  used  by 
2SG 


LATEST  ELECTRIC  LIGHT  REPORTS.       287 

the  various  writers,  and  if  possible  determine  wherein  their 
positions  lack  fundamentality  of  character.  We  should 
endeavor  to  point  out  the  line  of  study  leading  to  a  true 
result,  and  reduce  the  question  to  a  scientific  standard,  with 
the  hope  that  such  reduction  will  enable  us  to  apply  the 
statistics  we  may  obtain  from  many  individual  cases,  so 
that  the  truth  of  any  conclusions  will  appeal  to  all  who  are 
capable  of  reasoning  upon  scientific  facts. 

One  fundamental  principle  or  method  has  been  applied 
by  all  who  have  studied  this  problem  of  municipal  owner- 
ship of  electrical  plants.  This  fundamental  method  rests 
upon  a  comparison  of  the  cost  for  illumination  to  a  munici- 
pality by  a  municipal  plant,  with  the  charges  made  for  a 
similar  service  by  a  private  corporation.  These  questions 
of  cost  and  charges  have  sometimes  been  based  upon  the 
yearly  expense  of  the  entire  lighting  service,  sometimes 
upon  the  annual  charge  for  a  single  lamp,  sometimes  upon 
a  daily  rate,  and  recently  a  comparison  has  been  made  be- 
tween the  cost  per  candle-power  hour  in  the  different  sys- 
tems. It  is  therefore  hardly  to  be  expected  that  we  would 
gain  any  new  light  upon  the  problem  by  any  further  sub- 
division or  multiplication  of  statistics  involving  the  expense 
to  a  municipality ;  and  since  this  question  of  expense  has 
been  interpreted  from  the  same  statistics  with  such  widely 
different  results,  we  must  look  further  than  the  basis  of  the 
tax-rate  for  concordant  conclusions.  That  this  question  of 
the  simple  tax-rate  for  street  illumination  is  an  insufficient 
means  of  comparison  may  be  at  once  shown  from  the  most 
casual  investigation  of  the  conditions  under  which  munici- 
pal plants  and  private  corporations  are  furnishing  electrical 
supply.  The  sale  of  current  to  a  municipality  rarely  in- 
cludes more  than  a  quarter  of  the  entire  business  of  a  pri- 
vate electrical  corporation  ;  and  in  consequence  the  interests 
of  the  inhabitants  of  the  municipality  are  not  represented 


288  MUNICIPAL  MONOPOLIES. 

simply  by  the  expense  to  the  municipality  for  current  used 
in  illuminating  its  streets  and  public  buildings,  for  the 
inhabitants  are  equally  concerned  with  the  charges  that  will 
be  made  for  the  supply  of  current  which  they  individually 
consume.  Should  a  rate  for  public  lighting  be  made  by 
•  a  private  corporation,  involving  a  financial  loss  upon  the 
service,  such  a  rate  cannot  be  justly  used  in  comparing  the 
expense  with  that  of  a  municipal  plant  for  the  same  public 
service,  since  the  amount  of  loss,  as  well  as  profit,  upon  the 
entire  undertaking  must  be  covered  by  the  charges  to 
the  taxpayers  for  furnishing  their  individual  supply.  On 
the  other  hand,  the  low  running-expenses  of  a  municipal 
plant  may  not  always  be  a  source  of  profit  to  the  munici- 
pality, if  the  existence  of  a  municipal  plant  will  deprive  a 
private  corporation  of  a  profitable  portion  of  its  business, 
and  entail  an  expensive  system  of  operation,  necessitating 
excessive  charges  to  individual  consumers.  Laying  aside, 
for  the  present,  these  reasons  for  inconclusive  results  in 
comparative  studies  of  public  corporations  for  the  supply  of 
electric  current,  we  should  consider  the  economic  principles 
involved  in  such  a  supply,  considering  it  simply  as  a  muni- 
cipal undertaking,  whether  the  plant  is  actually  owned  by 
the  municipality  or  by  a  private  corporation. 

In  such  undertakings  the  community  is  concerned  with 
the  economy  of  manufacturing  rather  than  with  charges 
made  for  the  service.  Applying  to  such  a  case  the  old 
principle  that  "  a  man  may  be  considered  a  public  bene- 
factor who  makes  two  blades  of  grass  grow  where  one  grew 
before,"  we  find  that  we  may  consider  every  undertaking 
from  a  basis  of  economy  in  both  labor  and  materials.  A 
service  is  properly  performed  for  the  benefit  of  the  entire  com- 
munity when  the  minimum  amount  of  energy  is  employed  in  pre- 
paring  for  the  service  and  executing  it.  The  true  basis  of 
comparison  and  the  true  conclusion  in  studying  the  prob- 


LATEST  ELECTRIC  LIGHT  REPORTS.       289 

lern  of  electrical  supply  is  not  therefore  to  be  found  in  the 
cost  to  the  municipality  for  a  certain  portion  of  that  ser- 
vice, but  rather  in  the  expenditure  of  human  energy  for 
performing  the  whole  service.  That  electrical  plant  is  of 
the  greatest  service  to  the  whole  community  which  supplies 
a  given  amount  of  electrical  energy  with  the  smallest 
amount  of  plant,  the  lowest  consumption  of  coal,  water, 
and  supplies  of  every  kind,  and  in  which  the  simplest 
management  can  be  obtained  and  the  smallest  number  of 
men  employed  for  the  least  time  in  the  management,  in 
keeping  accounts,  in  operating  machinery,  and  in  perform- 
ing repairs. 

So  stated,  the  problem  becomes  one  of  the  science  of 
engineering,  rather  than  of  the  science  of  economics ;  since 
from  the  science  of  economics  the  engineer  derives  his 
instructions,  but  from  that  science  he  can  obtain  no  aid 
in  carrying  out  the  undertaking  in  a  manner  which  will 
conform  with  these  instructions.  Furthermore,  we  should 
point  out  that  the  comparison  so  outlined  cannot  be  made 
upon  the  limited  basis  of  any  unit  of  electrical  energy. 
To  compare  a  private  corporation  within  the  limits  of  a 
great  city,  where  an  immense  supply  is  furnished,  and  where 
special  conditions  of  non-interference  with  adjoining  prop- 
erty rights  are  to  be  met,  with  some  municipal  plant  in  a 
suburban  town  upon  a  basis  of  the  relative  amount  of  sup- 
plies and  labor  required  per  unit  of  electrical  energy,  would 
obviously  be  unfair  to  both  contestants.  Nor  is  it  possible 
to  compare  in  this  manner  two  lighting-stations  having 
approximately  the  same  yearly  output,  and  which  are  simi- 
larly located  with  reference  to  adjoining  interests,  but  are 
situated  the  one  in  the  North  and  the  other  in  the  South, 
for  the  reason  that  the  daily  period  of  service  will  vary  in 
these  two  localities  on  account. of  variation  in  the  hours 
of  darkness.     For  the  same  reason  we  cannot  compare  the 


290  MUNICIPAL  MONOPOLIES. 

summer  service  of  one  station  with  the  winter  service  of 
another,  even  though  we  should  attempt  to  reduce  them 
both  to  a  common  basis  by  obtaining  the  amount  of  human 
effort  employed  per  unit  of  electrical  energy.  Comparisons 
should  be  between  similar  plants,  or  between  those  simi- 
larly situated.  We  may  not  draw  a  parallel  between  muni- 
cipal and  private  central  stations  where  simply  the  same 
number  of  engines,  of  boilers,  of  dynamos,  and  the  same 
length  of  line  is  used,  or  where  the  same  number  of  lights 
are  supplied  with  current,  until  we  know  more  completely 
the  conditions  of  time  under  which  the  machinery  is  run 
and  the  energy  is  furnished. 

All.  of  these  conditions  wrhich  we  have  laid  down  for  a 
systematic  comparison  of  electric  plants  point  to  a  compar- 
ison of  the  amounts  of  supplies  and  the  sum  of  labor  employed 
in  furnishing  electrical  energy  in  two  similarly  situated  sta- 
tions where  the  load  curve  is  of  similar  form  and  area.  This 
load  curve,  upon  which  so  much  stress  is  thus  laid  in  the 
comparison  of  different  stations,  is  a  curve  showing  the 
output  of  any  station  at  each  interval  of  time  during  a  day, 
a  series  of  which  will  represent  the  output  of  the  station 
through  a  year.  By  a  study  of  the  characteristics  of  such 
a  series  of  curves,  we  may  determine  the  equipment  and 
machinery  which  are  best  adapted  for  a  station,  and  at  the 
same  time  we  may  tell,  with  a  reasonable  approximation 
to  truth,  the  amount  of  supplies  and  of  labor  that  should 
be  required  in  operating.  We  find  that  the  shape  of  such 
a  curve  depends  not  only  upon  the  character  of  the  supply, 
whether  of  arc  or  incandescent  lights  or  of  motors,  but 
also  upon  its  shape  as  determined  by  the  seasons,  and  that 
for  any  one  time  of  year  those  stations  upon  the  same  par- 
allel of  latitude  are  the  only  ones  in  which  the  curve  is  of 
similar  form.  . 

As  regards  the  shape  of  the  curve,  we  may  consider  as 


LATEST  ELECTRIC  LIGHT  REPORTS.       291 

typical  of  a  municipal  arc-lighting  supply-plant  one  which 
shows  the  same  amount  of  energy  furnished  at  all  instants 
for  a  considerable  period  of  time.  The  only  variation  in 
the  amount  of  energy  is  that  which  occurs  when  a  large 
number  of  lights  are  lighted  or  extinguished  together.  In 
the  general  form  for  large  stations  we  find  that  the  lighting 
all  begins  at  the  hour  of  sunset.  The  maximum  load  is 
carried  until  nine  o'clock,  when  a  portion  of  the  lights  is 
extinguished,  a  second  portion  being  extinguished  at  eleven 
o'clock,  the  remainder  running  until  sunrise. 

A  typical  motor  load  is  represented  by  a  curve  running 
at  the  same  level  from  seven  o'clock,  the  time  of  opening 
workshops,  until  noon,  and  at  the  same  level  from  the  hour 
after  dinner  until  the  time  of  shutting  down  in  the  evening. 

The  typical  load  for  an  incandescent  station  gives  no 
such  simple  curve,  since  the  time  of  operation  for  individ- 
ual lights  depends  upon  the  will  of  the  user,  and  not  upon 
anything  which  may  be  controlled  from  the  station,  though 
a  comparison  of  the  different  load  curves  shows  that  the 
time  of  use  is  very  largely  determined  by  natural  laws,  and 
that  the  incandescent  light  curve  of  different  stations  at  the 
same  latitude  is  generally  similar  in  form.  During  the  win- 
ter, in  cities  at  about  the  40th  parallel  of  latitude,  the  typi- 
cal load  curve  beginning  in  the  early  morning  shows  a 
lighting  load  of  about  2  per  cent  of  the  maximum,  which 
value  remains  constant  until  five  and  six  in  the  morning, 
when  workingmen  are  taking  their  breakfasts ;  then  a  short 
rise  to  perhaps  10  per  cent  extends  until  about  seven  o'clock, 
when  the  curve  falls  to  H  per  cent  of  its  maximum,  which 
continues  until  three  o'clock  in  the  afternoon.  Then  a 
rapid  rise  begins,  and  extends  to  the  maximum  load  of  the 
day,  from  six  to  eight  o'clock  in  the  evening.  This  value 
is  held  for  not  longer  than  two  hours,  when  the  load  falls 
until  it  reaches  the  value  given  for  the  very  early  morning. 


292  MUNICIPAL  MONOPOLIES. 

In  a  station  supplying  current  for  all  three  of  these  ser- 
vices, the  curves  are  obviously  superimposed  and  the  maxi- 
mum rises  accordingly.  This  maximum  determines  the 
capacity  of  the  station,  while  its  comparison  with  the  total 
output  of  the  station  gives  the  quantity  that  has  been  named 
the  Load  Factor.  This  is  the  relation  of  the  possible  sta- 
tion output  to  the  actual  output.  To  any  one  who  will  con- 
sider the  subject  of  the  amount  of  material  and  labor  used 
in  any  central  station,  it  will  be  at  once  apparent  that  this 
quantity  depends  as  much  upon  the  maximum  load  and  the 
load  factor  as  upon  the  actual  output.  These  two  quan- 
tities, the  load  factor  and  the  load  curve,  give  the  basis 
upon  which  different  electrical  stations  may  be  compared 
systematically. 

The  maximum  value  of  the  load  curve  determines,  as 
we  have  already  said,  the  maximum  capacity  of  the  station. 
Its  shape  should  determine  the  choice  of  the  proper  sized 
units  for  supplying  this  load,  while  finally  the  load  factor 
will  give  approximately  the  best  economy  under  which  such 
a  station  could  be  operated. 

To  compare  municipal  with  private  electric  lighting 
stations,  we  should,  therefore,  endeavor  to  determine  under 
which  management  the  best  engineering  in  the  design  of 
the  station  may  be  expected,  and  under  which  management 
the  most  economical  station  operation  can  be  obtained.  The 
answer  to  these  questions  is  the  solution  to  the  economic 
problem  without  regard  to  the  delusive  quantity  of  the  tax- 
rate. 

In  order  to  illustrate  more  clearly  the  principles  we  wish 
to  apply  in  the  study  of  the  problem,  a  few  applications  to 
definite  cases  will  undoubtedly  present  the  subject  in  a 
better  manner  than  can  be  done  in  any  statement  of  the 
principles.  Accordingly  a  number  of  curves  are  here  pre- 
sented, which  are  taken  from  similar  studies  of  definite 


LATEST  ELECTRIC  LIGHT  REPORTS.       293 

electrical  undertakings.  Diagram  A  represents  an  approxi- 
mate average  autumn  load  curve  of  a  small  station  operat- 
ing 189  "  all-night  "  arc  lamps,  120  "  11-o'clock  "  arc  lights, 
about  2,220  incandescent  lamps  of  16  c.  p.,  and  50  h.  p. 
in  motors.  We  see  at  once  that  the  day  load  consists  of 
a  motor  load  (marked  1)  and  a  light  incandescent  load 
(marked  4),  while  the  arc  load  is  represented  by  the  sections 
marked  2  and  3.  The  distinctive  character  of  these  various 
loads  to  which  we  have  called  attention  is  clearly  brought 
out  in  this  diagram ;  and  it  is  seen  that  while  the  motor 
and  arc  lighting  loads  are  constant  in  value,  the  incandes- 
cent load  rises  very  sharply  from  the  small  amount  required 
in  the  daytime  to  the  maximum  required  during  the  dinner- 
hour  in  the  evening.  These  load  characteristics  vary  with 
different  stations,  as  we  have  stated,  and  particularly  with 
changes  in  the  latitude ;  while  the  expense  of  operating  the 
station  is  a  function,  not  of  the  maximum  load  which 
determines  the  capacity  of  the  station,  but  of  the  shape 
of  this  load  curve,  and  the  value  of  the  load  factor. 

In  an  article  in  the  June,  1897,  number  of  Electrical 
Engineering,1  Mr.  E.  A.  Merrill  has  shown  that  in  such  a 
station,  where  a  plant  is  equipped  with  four  engines  of 
800  h.  p.  each  and  operates  for  two  hours  at  full  load 
for  the  engines,  three  hours  at  81  per  cent  of  full  load,  six 
hours  at  75  per  cent,  ten  hours  at  50  per  cent,  and  three 
hours  at  56  per  cent  of  full  load,  always  considering  the 
capacity  of  the  engines  in  actual  operation,  or  for  an  aver- 
age of  65 1  per  cent,  the  average  increase  in  coal  consump- 
tion per  indicated  horse-power  hour  over  the  best  results 
actually  obtained  in  this  station  is  as  much  as  12|  percent. 
His  figures  can  only  be  criticised  as  being  too  favorable  to 

1  "The  Total  Efficiency  of  Certain  Central  Stations,"  E.  A. 
Merrill.    Electrical  Engineering,  vol.  vii.,  No.  42,  p.  371. 


294  MUNICIPAL  MONOPOLIES. 

the  economy  of  the  station  on  account  of  the  large  load 
factor  of  65 1-  per  cent ;  whereas,  generally,  the  load  factor 
will  fall  below  40  per  cent,  and  the  percentage  of  increase  in 
coal  consumption  above  the  best  results  will  rise  to  30  or  35 
per  cent.  In  addition  to  this  one  item  of  coal  consumption, 
we  must  also  consider  the  fact  that  the  cost  of  management, 
repairs,  and  interest  are  not  variables  with  the  load,  but  are 
constant  throughout  the  day  and  even  through  the  year, 
though  the  load  curve  changes  its  shape  and  the  load  factor 
alters  its  value  with  each  changing  season. 

It  is  unfair  to  compare  a  station  operating  only  street- 
lights with  that  operating  a  mixed  load,  for  street-lights 
are  produced  at  a  lower  labor  cost  per  unit  of  energy  than  a 
mixed  load  would  allow.  Should  a  municipality  be  enabled 
to  reduce  its  tax-rates  by  the  operation  of  its  own  lights,  it 
would,  in  general,  necessitate  an  increase  in  the  rates  charged 
for  commercial  lighting.  To  be  sure,  should  the  amount 
of  power  increase  with  the  size  of  the  municipality  to  such 
a  degree  as  would  require  the  installation  of  many  generat- 
ing plants,  the  force  of  this  statement  would  be  lost.  The 
management  of  the  different  stations  must  be  independent, 
and  the  conducting  lines  for  different  classes  of  supply 
must  also  be  independent,  whether  the  power  be  furnished 
by  one  company  or  many,  —  by  the  municipality  alone  or  by 
the  municipality  in  connection  with  a  number  of  private 
corporations. 

Turning  again  to  the  consideration  of  actual  load  curves, 
Diagram  B  represents  the  load  curve  of  a  station  and  the 
corresponding  amounts  of  human  energy  required  in  main- 
tenance. The  area  between  O  —  X  and  A  represents  the 
interest  and  taxes  upon  the  entire  plant ;  the  area  between 
A  and  B,  the  proportion  due  to  management ;  between  B 
and  C  the  line  maintenance ;  between  C  and  D,  station 
maintenance ;  between  D  and  F,  labor ;  while  only  the  area 


LATEST  ELECTMJC  LIGHT  REPORTS.       295 

between  E  and  F  represents  the  expenditure  for  coal  and 
water,  and  is  variable  with  the  output  represented  by  the 
load  curve. 

The  skill  developed  in  planning  any  central  generating 
plant  will  in  part  depend  upon  the  experience  and  ability 
of  the  engineer  investigating  the  problem  and  designing 
the  generating  station.  The  likelihood  of  obtaining  such 
engineering  ability  will  vary  with  the  interest  of  the  man- 
agers in  the  result  of  the  plant,  and  with  the  manner  of 
their  appointment.  Political  appointments,  therefore,  will 
not  generally  bring  forth  as  much  talent  as  will  the  ap- 
pointment by  business  men  whose  fortunes  are  involved 
in  the  undertaking.  On  the  other  hand,  the  possibility  of 
a  correct  design  being  systematically  carried  out  is  a  func- 
tion of  the  funds  available  and  the  disposition  to  construct 
enduring  works.  Considering  this  portion  of  the  problem, 
we  find  that  experience  points  to  better  work  on  the  part 
of  municipalities  than  on  the  part  of  individuals  or  corpo- 
rations, for  the  reason  that  immediate  returns  are  required 
of  a  corporation  or  commercial  undertaking,  rather  than  a 
supply  involving  the  least  possible  ultimate  labor  cost. 

As  regards  the  problem  of  management,  the  political 
character  of  all  municipal  appointments  must  be  considered 
in  determining  the  question  of  efficiency.  It  is  not  possible, 
with  the  data  at  present  collected,  to  compare  public  and 
private  means  of  supply  in  the  manner  above  indicated,  for 
the  problem  has  not,  up  to  the  present  time,  been  consid- 
ered to  be  one  of  engineering,  but  simply  one  of  the  tax- 
rate,  or  cost  to  a  municipality  of  its  street-lights,  and  in 
consequence  the  figures  collected  are  not  those  from  which 
we  can  draw  exact  conclusions.  Furthermore,  even  when 
the  question  of  rates  has  been  stated,  the  total  rate  to  the 
community  for  all  forms  of  electrical  energy  has  not  been 
considered,  but  simply  the  cost  to  the  taxpayers  of  such 


29G  MUNICIPAL  MONOPOLIES. 

amounts  of  energy  as  are  sold  to  the  municipality.  It  has 
often  been  thought  that  a  gain  was  obtained  when  in  fact 
a  single  plant  and  single  management  were  replaced  by  two 
plants  and  two  sets  of  managers,  which  necessitated  a 
greater  labor  cost  to  the  community  than  before  the  tax- 
rate  was  reduced. 

The  determining  factor  in  the  installation  of  a  municipal 
plant  in  many  cases,  however,  involves  such  questions  as 
the  justice  of  exclusive  franchise  and  the  efficiency  of  the 
laws  controlling  corporations.  For  the  solution  of  problems 
of  this  nature  it  is  difficult  to  see  how  one  can  apply  such 
considerations  of  economy  of  operation  as  have  been  ex- 
amined in  this  chapter. 


IV. 

THE    TELEPHONE. 


THE    TELEPHONE. 


By  FRANK  PARSONS. 

Professor  of  History  and  Political  Science,  Kansas  State  Agricul- 
tural College,  Manhattan,  Kan.,  and  Lecturer  Boston 
University  School  of  Latv. 


There  is  reason  to  believe  that  the  telephone 
may  become  a  more  important  means  of  communi- 
cation than  either  the  telegraph  or  the  post.  It  is 
at  the  same  time  an  assistant  and  a  rival  of  the 
older  systems.  All  these  means  of  transmission 
should  be  operated  together  for  the  sake  of  good 
service,  economy,  and  harmonious  development. 
The  same  considerations  that  have  induced  so 
many  nations  to  put  the  telegraph  in  the  post-office 
caused  Germany,  Luxemburg,  Wurtemberg,  Bul- 
garia, Bavaria,  and  other  countries  to  make  the 
telephone  also  a  part  of  the  postal  system  from 
the  start.  In  other  countries,  like  Austria,  Bel- 
gium, France,  Switzerland,  Sweden,  and  Great 
Britain,  telephone  exchanges  were  first  established 
by  private  companies  ;  but  the  rapidly  growing  im- 
portance to  the  public  of  a  cheap,  extensive,  and 
efficient  telephone  service,  managed  in  connection 

299 


300  MUNICIPAL  MONOPOLIES. 

with  the  telegraph  and  the  mail,  brought  about  a 
movement  toward  public  ownership  which  resulted 
in  national  purchase  of  the  private  exchanges,  and 
the  establishment  of  new  ones  by  the  State,  so 
that  in  the  first  four  countries  mentioned  above,  the 
telephone  has  become  entirely  a  public  institution. 
In  Sweden  the  transformation  is  nearing  comple- 
tion, and  in  England  the  trunk-lines  have  be- 
come postal  property ;  and  it  is  generally  believed 
that  the  government  will  acquire  the  entire  busi- 
ness of  the  exchanges  when  the  National  Tele- 
phone Company's  license-  expires.  In  Italy  and 
Spain  concessions  of  twenty-five  and  thirty  years 
have  been  granted  to  private  companies  on  condi- 
tion that  at  the  end  of  the  franchise  term  the  tele- 
phone system  shall  become  public  property  without 
any  payment  to  the  companies. 

In  Denmark,  Finland,  and  Norway  the  exchanges 
are  largely  in  the  hands  of  local  companies,  co- 
operative societies,  municipalities,  and  rural  author- 
ities. The  trunk-lines  in  Denmark  and  Norway 
are  built  and  maintained  by  co-operative  agreement 
among  the  exchanges.  The  cost  of  a  trunk-line  is 
apportioned  among  the  societies  using  it,  and  each 
exchange  retains  the  whole  of  its  receipts  for  talks 
over  the  trunk-line.  In  Finland,  an  interurban  com- 
pany owns  the  trunk-lines.  In  Holland  the  gov- 
ernment supplied  the  materials,  and  the  companies 
owning  the  exchanges  supplied  the  labor  to  build 


THE   TELEPHONE.  301 

trunk-lines.  These  lines  are  maintained  by  govern- 
ment, which  receives  seventy-five  per  cent  of  the 
trunk-line  tolls.  In  Russia  and  Hungary  some  ex- 
changes are  public  and  some  are  private  property. 
In  Portugal  and  the  United  States  the  business 
is  substantially  all  controlled  by  a  big  private 
monopoly. 

TELEPHONE    CHARGES. 

Telephone  charges  and  service  vary  greatly  in 
different  countries,  as  will  be  seen  from  the  accom- 
panying tables.1 

In  Table  II.  are  given  the  rates  of  telephoning 
for  single  messages.  The  figure  outside  of  the 
parentheses  is  the  charge  in  cents,  independent 
of  the  length  of  the  message,  and  the  fraction 
within  the  parentheses  is  the  additional  charge 
per  word.  Thus  the  ordinary  charge  for  tele- 
phoning a  letter  is  two  cents  plus  one-fifth  of  a 
cent  for  each  word.  Postage  must  be  added  to 
this. 

1  The  foreign  data  given  in  this  chapter  have  been  gathered 
from  government  and  corporation  reports,  the  writings  of  experts, 
and  electrical  journals  of  high  character,  especially  the  Electrical 
Review  of  London  and  the  Journal  Telegraphique,  published  by 
the  International  Telegraph  Bureau  at  Berne,  Switzerland.  A 
special  debt  is  due  to  Mr.  A.  R.  Bennett,  the  eminent  English 
telephone  engineer,  whose  books  and  magazine  articles  have  been 
of  great  assistance.  See  his  "Telephone  Systems  on  the  Conti- 
nent," "Telephoning  in  Great  Cities,"  and  his  writings  in  the 
English  Electrical  Reviews. 


302 


MUNICIPAL  MONOPOLIES. 


TABLE  I.       Annual  Kates. 


Ordinary 

Country. 

Ststbm.                    Entrance  Fee. 

Annual 

Charges. 

Germany, 

State  system, 

None, 

$36 

Wiirtemberg, 

"            " 

" 

25 

Belgium, 

(<            (( 

ii 

30 

Switzerland,1 

<(            (i 

8+ 

France,1 

II                 II 

30  to  $78 

Luxemburg, 

<<                 a 

None, 

16 

Austria, 

(I                 u 

$21 

21 

Sweden, 

"                 " 

$14 

20 

u 

Private  system, 

$14 

26  . 

Norway,  towns, 

Co-operative  societies 

10 

"             " 

Private  system, 

10 

Trondhjem, 

Municipal  system, 

None, 

13 

Christiania, 

"              " 

" 

22 

Finland, 

Co-operative  system, 

$50 

10  to  $14 

" 

Private  system, 

None, 

16  "     24 

Denmark, 

"              " 

" 

10  "     24 

Holland, 

ii              « 

.  i< 

13  "    100 

Italy, 

ii              << 

ii 

14  "     34 

Spain, 

ii              ii 

ii 

28  "     60 

Portugal, 

it             <i 

ii 

38 

Russia, 

ii              ii 

<i 

50  "  125 

England, 

ii             <i 

ii 

45  "  100 

<< 

State  system, 

ii 

32  "     67 

New  Zealand, 

"             " 

it 

24 

United  States, 

(Bell) 

Private  system, 

ii 

36  "  250 

United  States, 

Cost, 

(Interior  Dept.),  Government, 

$48 

10 

In  translating  European  money  into  American, 
a  mark  is  figured  at  23.82  cents;  a  shilling  at 
24  cents ;  and  a  franc  at  19  cents  in  large  calcula- 
tions and  20  cents  in  small  ones,  where  only  round 
numbers  were   needed.     In   fact,  round  numbers 


1  See  discussion  of  Swiss  and  French  systems  below. 


THE    TELEPHONE. 


303 


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304  MUNICIPAL  MONOPOLIES. 

rather  than  fractions  were  used  wherever  consist- 
ently possible. 

We  will  first  discuss  the  telephone  systems  of 
Norway,  Sweden,  Switzerland,  Luxemburg,  Bel- 
gium, Germany,  Great  Britain,  and  other  countries 
of  Europe,  where  the  service  has  been  carried  to 
the  highest  perfection,  and  then  describe  the  situa- 
tion in  the  United  States.  The  headlines  will 
enable  the  reader  at  once  to  pass  to  any  desired 
part  of  the  discussion.  The  points  of  chief  inter- 
est are  Christiania  and  Trondhjem  in  Norway,  Lux- 
emburg, Belgium,  and  Switzerland,  the  experience 
of  England,  and  the  tables,  comparisons,  co-opera- 
tive experiments,  and  government  data  given  in 
the  last  section  under  caption  of  "  The  United 
States." 

Norway. 

Christia?iia,  the  chief  city  of  Norway,  with 
150,000  inhabitants,  has  a  telephone  system  in  the 
management  of  which  the  city  exercises  considera- 
ble influence,  being  the  owner  of  a  block  of  the 
telephone  stock,  and  having  effective  representa- 
tion in  the  managing  council  and  on  the  board  of 
directors.  There  are  5,000  exchange  lines.  The 
yearly  cost  to  each  subscriber  is  $22.25  for  the  first 
phone  ;  $5.50  to  $8.25  for  a  second  phone  on  the 
same  line  to  the  same  subscriber;  $8.25  to  $11.10 
to  a  third  person ;  so  that  two  neighbors  can  unite 


THE   TELEPHONE.  305 

and  obtain  good  service  for  $16.00  a  year  each; 
and  the  system  pays  5^  per  cent  on  the  capital  in- 
vested, after  putting  aside  large  reserves,  writing 
off  values  of  buildings  and  lines,  and  providing 
relief  funds  for  employees. 

A  subscriber  may  telephone  a  message  to  be  written 
down  and  sent  to  the  addressee  by  the  messenger,  or  to  be 
forwarded  by  the  public  telegraph.  Telegrams  may  be  tel- 
ephoned from  the  state  telegraph  office  to  any  telephone 
subscriber.  A  non-subscriber  called  for  will  be  sought  out 
by  telephone  messenger,  and  brought  to  a  telephone  station 
to  talk  with  the  caller.  For  this  service  the  charge  is  5 
cents,  payable  by  the  person  called.  For  telephoning  a  tel- 
egram, either  to  or  from  a  telegraph  office,  the  charge  is  5 
cents  for  20  words  and  1\  cents  for  each  additional  10  words. 
Telephonograms,  or  messages  sent  over  the  telephone  to  be 
written  down  and  delivered  by  local  messengers,  may  be 
sent  for  8  cents  to  13  cents,  according  to  the  distance  the  mes- 
sage has  to  go.  For  each  body  word  beyond  30  the  charge 
is  increased  one-quarter  of  a  cent  irrespective  of  distance. 
The  addressee  may  send  back  by  the  messenger  a  written 
reply  at  half  price  up  to  30  words,  —  one-quarter  of  a  cent 
a  word  beyond  that.  A  subscriber  pays  6|  cents  for  a  talk 
with  a  neighboring  town,  and  13  cents  for  a  distant  con- 
nection. Non-subscribers  using  public  telephone  stations 
pay  1\  cents  for  a  five-minute  talk  with  a  subscriber  in  the 
city,  13  cents  for  a  five-minute  trunk-talk,  and  can  send 
telegrams  and  telephonograms  at  the  same  rates  as  sub- 
scribers. These  messages  by  telephone  delivery  really  con- 
stitute a  local  telegraph  service. 

Trondhjem,  the  third  city  of  Norway  (30,000 
population),   is   the   banner   city  in  the  growing 


306  MUNICIPAL  MONOPOLIES. 

movement  for  municipal  ownership  of  the  local 
telephone  system.  The  original  exchange  was  a 
private  one,  established  in  1882.  The  rates  were 
low,  but  the  service  was  unsatisfactory;  so  that 
in  1889  the  town  bought  the  property,  and  recon- 
structed it  in  the  most  thorough  manner.  The 
town  rates  are :  — 

Per  year. 
For  a  business  place  within  l£  km.  (about  one  mile)  of 

central  station $16.65 

For  a  second  business  connection  by  tbe  same  person  or 

firm 13.31 

For  a  private  house,  same  distance 8.33 

For  each  100  meters  beyond  \\  km 1.37 

The  town  builds  all  lines,  supplies  the  instru- 
ments, and  maintains  the  system,  the  above  charges 
being  the  only  ones  subscribers  have  to  pay. 

There  are  780  exchange  lines  and  8  private  lines.  The 
average  rental  received  for  an  exchange  line  is  49.1  kr.,  or 
$13.25,  per  year.  The  subscribers  speak  to  surrounding 
towns  (there  are  11  of  them)  within  50  miles  at  the  rate  of 
4  cents  for  5  minutes.  The  non-subscribing  public  pays 
6£  cents  per  conversation  interurban,  and  1\  cents  for  a 
local  conversation.  Each  subscriber  makes  an  average  of  8 
or  9  calls  a  day,  so  that  the  cost  of  a  local  conversation  to  a 
subscriber  is  about  \  a  cent.  The  Trondhjem  telephone  re- 
ceipts afford  a  surplus,  after  covering  all  working  expenses, 
interest  on  the  capital  invested,  a  reserve  of  5  per  cent  a 
year  on  the  capital,  and  insurance  of  employees  against 
death,  accident,  and  sickness. 

In  nearly  every  Norway  town  of  2,500  people  or  more, 
there  is  an  exchange,  usually  worked  by  a  co-operative  so- 


THE   TELEPHONE.  307 

ciety  or  a  local  company,  at  rates  varying  from  $7  to  $16  a 
year,  the  average  rate  in  four  co-operative  societies  reported 
being  $10,  and  the  average  in  9  local  companies  reported 
is  the  same.  The  $7  rate  is  made  by  company  exchanges 
in  Stavanger  and  Hangesund,  both  of  which  require  the 
subscriber  to  pay  for  his  instruments  and  for  the  construc- 
tion of  his  own  line.  The  co-operative  society  at  Grimstad 
makes  an  $8.25  rate,  and  furnishes  line  and  instruments 
without  cost  to  the  subscriber. 

Sweden. 

In  Sweden  the  International  Bell  Telephone 
Company  opened  exchanges  in  Stockholm  and 
Gothenburg  in  1880.  Rates  were  high  and  devel- 
opment slow  until  opposition  came  through  Mr. 
Cedergren's  local  company  in  Stockholm  and  a  co- 
operative society  in  Gothenburg,  which  charged 
each  member  the  cost  of  his  line  and  instrument, 
and  816.66  a  year  for  operation  and  maintenance, 
the  annual  fee  to  be  reduced  as  fast  as  circum- 
stances permitted.  The  plan  worked  well,  and 
Sweden  was  soon  dotted  with  co-operative  ex- 
changes. The  latest  statistics  available  give  158 
of  these  co-operative  exchanges  in  Sweden,  —  30  in 
towns,  and  the  rest  in  villages  and  rural  commu- 
nities. In  some  of  the  villages  the  annual  assess- 
ment for  working  and  maintenance  is  only  $6.25 
to  17.50  per  subscriber.  The  state  now  owns  most 
of  the  interurban  lines,  and  is  fast  absorbing  the 
exchanges. 


308  MUNICIPAL  MONOPOLIES. 

Iii  Stockholm,  a  place  of  260,000  people,  the  Bell 
Company's  rate  was  $44.43.  Mr.  Cedergren 
charged  an  entrance-fee  of  $14  and  $27.75  per 
year,  or  with  two  subscribers  on  one  line,  $22.22 
each,  an  average  of  about  $26.  The  government 
bought  the  Bell  plant.  It  established  metallic  cir- 
cuits throughout,  and  underground  work  wherever 
possible,  charged  $14  entrance-fee,  and  $22.22  a 
year  for  a  business-place,  and  $16.66  for  a  house, 
reserving  the  right  to  put  two  subscribers  on  one 
house-line.  Lower  rates,  a  metallic  circuit  instead 
of  single  wires,  underground  wires  instead  of  over- 
head, and  a  more  complete  service  were  furnished 
by  the  public  company.  The  state  set  Mr.  Ceder- 
gren a  pretty  good  example  of  competition ;  but  he 
already  had  5,000  subscribers,  and  the  staying  qual- 
ities of  established  connections,  together  with  the 
inertia  incident  to  an  entrance-fee,  and  the  fine 
enterprise  displayed  by  Cedergren  saved  his  busi- 
ness. He  converted  his  system  to  the  metallic  cir- 
cuit, gave  his  subscribers  free  trunk-service  within 
43  miles  of  Stockholm,  and  allowed  them  to  tele- 
phone telegrams  free  of  charge. 

This  free  telephoning  of  telegrams,  for  which 
the  state's  subscribers  have  to  pay  lj  cents  per 
message,  tends  to  equalize  the  annual  rates  of  the 
two  exchanges.  The  state  does  not  allow  Mr. 
Cedergren's  subscribers  to  participate  in  the  inter- 
national telephone  service ;  and  outside  of  Stock- 


THE  TELEPHONE.  309 

holm  the  state  will  not  allow  its  competitors  to 
use  the  trunk-lines,  nor  telephone  telegrams,  nor, 
in  some  cases,  to  communicate  with  its  own  subscri- 
bers in  the  same  locality. 

The  services  and  rates  in  Stockholm  are  as  fol- 
lows. It  may  be  noted  that  the  average  time  con- 
sumed in  making  connection  is  8  to  10  seconds. 

STATE   TARIFF. 

1.  Local  exchange,  average  rate $20  a  year. 

2.  Interurban  communication  within  a  radius  of  43  miles,  Free. 

3.  Interurban  connection  beyond  43  miles 4  cents  to  2GJ. 

4.  International  communication. 

3  minutes  to  Christiania .40  cents. 

3  minutes  to  Drammen,  Drobak,  etc 44  cents. 

3  minutes  to  Copenhagen 55  cents. 

5.  Telephoning  telegrams  (per  message  irrespective  of 

words) \\  cents. 

6.  Telephoning  messages  to  be  written  down  and  deliv- 

ered (40  words) 6£  cents. 

7.  Telephoning  to  a  subscriber  40  words  in  writing,  handed 

in  at  a  telegraph  or  public  telephone  station    .    .    .    6£  cents. 

8.  Calling  a  non-subscriber  by  messenger  to  a  public  tele- 

phone station 6£  cents. 

9.  Public  station  service  for  subscribers  or  non-subscribers. 

Local  conversation  in  Stockholm 1J  cents. 

Outside,  within  43  miles  radius 4  cents. 

Other  interurban  talk 4  cents  to  26£. 

International  talk,  same  as  above. 

Almost  every  town,  village,  and  hamlet  in  Swe- 
den has  its  telephone  exchange  ;  and  nearly  all  are 
united  by  interurban  lines.  The  same  is  true  of 
Denmark.  In  Denmark  and  Finland  there  are  co- 
operative societies,  with  rates  varying  from  flO  to 
$24  a  year.  Private  companies  in  Denmark  make 
rates  almost,  and  in  one  case  quite,  as  low;  but 
in  Copenhagen  the  monopoly  established  by  the 


310  MUNICIPAL   MONOPOLIES. 

International  Bell  Company  charges  $41.66.  Der 
Grathianer,  of  Zurich,  states  that  on  July  1, 1897, 
the  government  of  Wiirtemberg  reduced  the  price 
of  telephone  messages  within  50  kilometers  from 
12  cents  to  6  cents,  and  within  six  weeks  this 
change  increased  the  use  of  the  telephone  fourfold, 
thereby  doubling  the  income  of  the  government 
telephone  department. 

Holland. 

In  Holland  a  private  local  company  at  Zutphen 
(17,000  inhabitants)  is  making  money  on  a  $14.45 
inclusive  annual  charge,  with  first  class  metallic 
circuits  and  A  1  instruments.  More  than  a  dozen 
other  towns  enjoy  equally  low  rates,  and  two  go  be- 
low $13.  The  Netherlands  Bell  Company  charges 
anywhere  from  $17  to  $45  in  the  towns,  and  in 
Rotterdam  and  Amsterdam  $50  to  $100.  In  the 
latter  place  ten  dollars  of  the  hundred  go  to  the 
town  council. 

If  a  subscriber  wishes  to  use  the  trunk-lines,  he  must 
pay  a  special  subscription  of  $4  a  year  (in  addition  to  his 
local  subscription),  and  then  pay  20  cents  for  3  minutes 
each  time  he  uses  the  trunk.  If  a  subscriber  wishes  his 
telegrams  telephoned,  he  must  pay  a  special  subscription  of 
$2  a  year  in  addition  to  his  ordinary  subscription  and  the 
2-cent  charge  for  each  telegram.  This  #:2  subscription  is 
remitted,  however,  to  one  who  subscribes  for  the  trunk- 
service. 


THE   TELEPHONE.  311 


Luxemburg. 

In  Luxemburg,  a  Grand  Duchy  of  998  square 
miles  (44  by  30),  the  telephone  is  entirely  in  the 
hands  of  the  state.  The  capital  (18,000  popula- 
tion) had  621  exchange  phones  in  1895,  or  3.4 
phones  for  each  hundred  persons.  The  uniform 
charge  is  $16  a  year.  There  is  no  entrance-fee  or 
assessment.  No  other  charge  is  made  upon  one 
located  within  a  mile  of  a  wire  (as  most  people  are, 
so  thick  are  the  wires),  and  for  one  outside  the  limit 
the  only  additional  cost  is  an  initial  construction-fee 
of  $20  for  each  kilometer.  The  state  is  netted  with 
trunk-lines  ;  and  each  subscriber  has  the  use  of  the 
interurban  wires  free  of  charge,  and  can  talk  all 
over  the  Duchy  as  well  as  within  his  own  town  or 
city,  without  any  payment  beyond  his  $16. 

The  following  services  are  rendered :  — 

1.  Local  communication $16  a  year. 

2.  Interurban  communication Free. 

3.  Telephoning  telegrams  to  or  from  a  sub-     < 2  cents  per  message,  re- 

scriber I  gardless  of  its  length. 

4.  Telephoning  message  to  be  written  down,      i  2  cents  per  message,  plus 

and  delivered  by  messenger I  7  cents  for  messenger. 

5.  Telephoning  message  to  be  written  down,      r  2  cents  per  letter,  plus 

and  posted  as  a  letter (  postage. 

6.  Public  stations. 

To  subscribers Free. 

/  7  cents  for  five  minutes 

To  non-subscribers J  talk  with  a  subscriber 

l  anywhere  in  the  state. 
Two  non-subscribers  talking  with  each 

other,  each  pays 7  cents. 


312  MUNICIPAL  MONOPOLIES. 

7.  Sending  messenger  to  bring  a  non-subscriber  to  public  station, 

a.  At  call  of  a  subscriber,  7  cents  and  upward,  at  rate  of  about  3 

cents  a  mile  for  messenger. 
6.  At  call  of  a  non-subscriber,  same,  plus  7  cents  for  use  of  phone 

by  caller. 

8.  Proprietors  of  hotels  and  other  public  places  pay  the  ordinary  rate, 

and  may  allow  their  customers  free  use  of  the  instruments  up  to 
2,000  calls,  after  which  a  charge  is  made  of  7  cents  a  call. 


Switzerland. 

In  Switzerland  the  government  has  aimed  to 
bring  the  telephone  within  the  reach  of  all,  and 
make  the  service  as  good  as  possible.  All  trunks 
are  double ;  and  in  Zurich,  Berne,  Geneva,  and 
other  cities  the  exchange-lines  have  been  converted 
to  the  metallic  circuit,  single-wire  construction 
having  been  abandoned  several  years  ago.  The 
Swiss  tariff  (since  Jan.  1,  1896)  provides  for  a 
subscription-rate  of  $8  a  year,  plus  1  cent  for  each 
call.  The  plan  of  charging  by  the  call  reduces 
the  use  of  the  telephone,  so  that  the  calls  in  Zurich 
only  average  two  per  day,  as  against  eight  or  nine 
per  day  in  other  well-telephoned  countries  of  Eu- 
rope, and  eight  and  a  half  in  the  United  States. 
At  two  calls  per  day,  a  subscriber  would  pay  $15.25 
per  annum.  An  ordinary  subscriber  making  eight 
calls  a  day  pays  $37  a  year.1     Telegrams  are  tele- 

1  For  1P97  the  average  subscription  payment,  including  the 

jes  for  extra  instruments  and  extra  length  of  line,  was  $13. 

The  local  conversation  taxes  averaged  $5  per  subscriber,  so  that 

the  total  charges  for  ordinary  local  service  averaged  not  more 

than  $18  a  year  for  each  subscriber. 


THE   TELEPHONE.  313 

phoned  to  or  from  a  subscriber  for  2  cents  a  message. 
Telephonograms  cost  4  cents,  plus  i  of  a  cent  a 
word.  A  non-subscriber  may  use  a  public  station 
at  2  cents  for  three  minutes,  and  telephoning  tele- 
grams or  telephonograms  costs  him  2  cents  more 
than  the  same  service  rendered  to  a  subscriber. 
For  interurban  trunk-talks  the  charges  are  6  cents 
up  to  31  miles,  10  cents  up  to  62  miles,  and  15 
cents  above  62  miles  to  any  Swiss  distance.  The 
United  States  Consular  Report,  vol.  56,  1898,  page 
584,  says,  "  Switzerland  has  one  of  the  finest  tele- 
phone systems  in  the  world.  It  is  owned  by  the 
Government,  and  operated  in  the  interest  of  all  the 
people." 

Austria. 

In  Austria  the  private  companies  charged  $40  in 
Vienna  and  $25  elsewhere.  Since  the  government 
bought  the  lines,  the  uniform  charge  up  to  9^  miles 
is  $21  (except  for  hotels,  clubs,  railway  stations, 
etc.,  where  the  instruments  are  to  be  free  to  all 
comers,  in  which  cases  the  rate  is  doubled). 

Non-subscribers  can  use  the  ordinary  public  stations  at 
4  cents  for  local  conversation,  and  for  other  services  at  the 
same  rate  as  subscribers ;  viz.,  12  cents  for  a  talk  of  three 
minutes  with  a  neighboring  town  ;  international  talk  from 
Vienna  to  Berlin,  66  cents  (to  Bavaria,  Wurtemberg,  or 
Switzerland,  25  cents) ;  express  talks,  or  urgent  conversa- 
tions taking  precedence  of  all  others  (interurban  or  inter- 
national, except  to  Switzerland),  triple  rates  5  telephoning 


314  MUNICIPAL  MONOPOLIES. 

telegrams,  2  cents,  plus  £  of  a  cent  a  word  (4  cents  for  ten 
words);  telephonograms,  same  rate;  telephoning  letters, 
same  rate,  plus  T45  of  a  cent  for  paper  and  envelope,  plus 
postage  of  course. 

Germany. 

The  German  postal  telephone  charges  135.70  a 
year  up  to  about  three  miles,  and  after  that  the 
charge  is  increased  by  about  75  cents  for  each  100 
yards.  This  charge  is  high,  and  together  with  the 
use  of  single  wires  insisted  upon  by  the  Imperial 
Post  has  prevented  a  development  of  the  tele- 
phone at  all  comparable  to  what  exists  in  Norway, 
Sweden,  Denmark,  etc.,  where  low  rates  and  local 
control  of  exchanges  have  rilled  even  the  rural  dis- 
tricts with  telephones.  Additional  telephones  will 
be  put  into  the  same  building  or  the  same  piece  of 
property  for  a  second,  third,  etc.,  participator  on 
the  same  wire  for  $11.90  each ;  so  that  subscribers 
can,  by  combining,  get  a  rate  of  $23.80  per  tele- 
phone year.  And  if  the  same  subscriber  desires 
an  additional  telephone  in  the  same  property,  it 
will  cost  him  but  $4.76  a  year.  One  can  talk 
all  over  Germany  for  25  cents,  and  conversations 
between  neighboring  places  cost  but  10  cents. 

Express  talks  are  at  triple  rates  ;  international  conversa- 
tions, 25  cents  to  66  cents ;  telephoning  telegrams,  2  cents 
plus  5  of  a  cent  a  word ;  telephonograms,  same,  plus  cost  of 
messenger  ;  telephoning  letters,  same,  plus  cost  of  postage ; 


THE  TELEPHONE.  315 

non-subscribers  at  public  stations,  5  cents  for  a  local  con- 
versation ;  for  other  services  same  rates  as  above  stated  for 
subscribers. 

The  telephoning  of  letters  is  a  very  convenient 
thing.  It  practically  extends  the  time  of  closing 
the  mails,  and  it  gives  a  telephone  and  amanuen- 
sis all  in  one.  Suppose  a  merchant  in  a  town 
fifty  miles  or  so  from  Berlin  finds  that  he  needs 
to  send  a  letter  to  Paris  or  London  after  the  last 
mail  from  his  town  has  gone ;  he  simply  tele- 
phones his  letter  to  Berlin  in  time  for  the  night 
express  to  Paris,  instead  of  letting  the  letter  wait 
till  the  next  day,  as  our  merchants  in  Waltham, 
for  instance,  would  have  to  do  in  case  of  a  similar 
belated  wish  to  communicate  with  New  York  or 
Philadelphia. 

Belgium. 

In  Belgium  the  telephone  trunks  and  exchanges 
are  all  in  the  hands  of  the  state,  and  operated 
with  the  telegraph  as  part  of  the  postal  service. 
The  lines  established  by  the  government  are  all 
double  wires,  and  the  charge  is  $30  to  $35  within 
a  mile  of  an  exchange.  In  the  areas  originally 
controlled  by  private  companies,  and  taken  over 
by  the  State,  the  wires  are  mostly  single ;  and  the 
rates  (being  the  original  private  charges  continued 
in  force)  sometimes  run  as  high  as  $50.  In  many 
of  the  larger  cities  a  reduction  of  $10  a  year  is 


316  MUNICIPAL  MONOPOLIES. 

made  if  the  same  person  or  firm  subscribe  for  more 
than  one  line.  This  makes  a  rate  of  $40  in  Ant- 
werp and  Brussels,  and  $30  in  Ghent,  Verviers, 
and  La  Louviere. 

Subscribers  may  allow  non-subscribers  to  use  their  instru- 
ments free  of  charge.  Hotel,  restaurant,  and  club  telephones 
are  free  to  all.  In  each  district  interurban  conversations 
are  free.  In  the  Brussels  district,  for  example,  a  subscriber, 
for  his  |30  a  year,  may  talk  without  restriction  or  extra 
payment  to  Nieuport,  10  miles,  to  Blankenberghe,  11  miles, 
to  Bruges,  13  miles,  to  Heyst,  16  miles.  A  Nieuport  sub- 
scriber can  speak  freely  with  Heyst,  26  miles,  and  in  some 
areas  even  much  longer  distances  are  covered  by  the  ordi- 
nary subscription.  From  one  district  to  another  the  charge 
is  20  cents  for  five  minutes  (or  30  cents  for  ten  minutes) 
from  any  point  to  any  other  point  in  the  kingdom.  By 
making  a  monthly  contract,  still  lower  rates  for  trunk-ser- 
vice can  be  obtained.  Trunk  rates  for  non-subscribers  are 
the  same  as  for  subscribers,  but  5  cents  is  charged  for  a 
local  call  by  a  non-subscriber  at  a  public  station. 

The  state  regards  the  telephone  as  a  valuable 
feeder  to  the  telegraph,  and  makes  no  charge  for 
telephoning  messages  to  the  telegraph  office.  This 
telephone  service  virtually  brings  the  telegraph 
into  the  home  and  to  the  merchant's  desk,  and 
saves  a  million  journeys  by  messengers  each  year; 
as  the  messages  telephoned  to  the  telegraph  num- 
ber about  one  million  per  annum,  —  one  for  every 
five  private  telegrams,  and  one  in  each  eight  tele- 
grams, public  and  private.     The  postal  telegraph 


THE  TELEPHONE.    «  317 

business  has  steadily  and  rapidly  grown  under  this 
arrangement  in  spite  of  the  enormous  use  of  the 
trunk  telephone  lines,  interurban  and  international. 
In  Holland  and  Sweden  the  government  authorities 
at  first  were  much  afraid  that  the  trunk-service 
would  diminish  the  telegraph  receipts  ;  but  experi- 
ence in  those  countries  as  well  as  in  Belgium  has 
conclusively  shown  that  when  a  proper  inter-rela- 
tion is  established  between  the  telephone  and  the 
telegraph,  the  former  adds  more  as  a  feeder  to  the 
telegraph  than  it  subtracts  as  a  competitor.  It  is 
only  in  countries  like  England  and  the  United 
States,  where  the  telegraph  and  the  telephone  are 
not  co-ordinated,  that  the  new  service  really  inter- 
feres with  the  growth  of  the  old  one. 

France. 

The  French  laws  of  1837  and  1851,  giving  the 
state  a  monopoly  of  telegraphic  communication, 
were  held  to  include  the  telephone.  Concessions 
were  granted,  however,  by  the  government  to  pri- 
vate companies,  on  condition  that  they  should  pay 
10  per  cent  of  the  gross  receipts  to  the  state ;  that 
the  Department  of  Posts  and  Telegraphs  should 
construct  and  maintain  the  company's  lines  at 
prices  to  be  fixed  by  the  department ;  that  the  state 
should  have  the  right  to  fix  rates,  and  to  buy  the 
system  at  the  end  of  the  five-year  franchise  for  the 


318  MUNICIPAL  MONOPOLIES. 

value  of  the  material  employed  in  it.  In  1883  a 
few  exchanges  were  opened  by  the  Department  of 
Posts  and  Telegraphs.  In  September,  1889,  the 
state  took  possession  of  the  private  lines,  and  at 
once  reduced  the  rates  from  1116  to  $78  in  Paris, 
and  from  $78  to  $39  elsewhere,  except  in  Lyons, 
where  the  charge  is  $58.50,  there  being  in  Lyons, 
as  in  Paris,  a  great  deal  of  very  expensive  under- 
ground work.  Using  round  numbers,  the  present 
charges  run  from  $30  to  $80,  or,  if  we  include  the 
rate  for  a  second  instrument,  $10  to  $80.  The 
rates  and  services  in  detail  are  as  follows  :  — 

Paris,  subscriber  paying  for  bis  instrument,  but  not         Rates. 

for  line,  first  instrument $78  a  year. 

Second  instrument  in  same  building $10  a  year. 

Second  instrument,  not  in  same  building,  but  on 
same  line,  for  same  subscriber,  or  another  with 
his  assent $31  a  year. 

Lyons,  subscriber  pays  for  his  instruments,  not  for 
line ;  rates  $60,  $10,  and  $24  in  same  order  and 
for  same  things  as  in  Paris. 

Other  towns  over  25,000  inhabitants,  subscriber  pays 
for  his  instruments,  plus  an  initial  charge  of 
$50  a  mile  single  wire,  and  $100  a  mile  metallic 
circuit,  for  his  line,  and  (within  free  delivery 
limits)  a  subscription  of $40  a  year. 

Towns  under  25,000,  subscriber  pays  for  instruments 

plus  initial  fee  as  above,  and $30  a  year. 

Telegrams  telephoned  free,  except  in  Paris  and  Lyons, 
where  a  special  subscription  of  $10  a  year  is 
necessary  if  the  subscriber  desires  this  service. 

Telephonograms,  or  messages  telephoned  for  local 
delivery  by  messenger,  for  every  5  minutes  oc- 
cupied in  transmitting  message 10  cents. 

Public  stations,  local  talk  (5  minutes),  Paris      ...    10  cents. 

Other  places  .      5  cents. 


THE  TELEPHONE.  319 

Yearly  subscription  for  local  use  of  all  public  stations,    • 
$16  Paris,  $12  Lyons,  $8  elsewhere. 

Trunk-talks,  interurban,  for  each  62  miles  (5  minutes),  10  cents. 
(From  Paris  to  Marseilles,  560  miles,  86  cents.) 
Night  service  half  price,  and  commutation  rate 
for  a  5-minute  talk  each  day  over  a  specified 
trunk,  4  cents  for  each  62  miles,  multiplied  by 
the  number  of  days.  (Monthly  license  for  62 
mile  trunk,  $1.20.) 

Great  Britain. 

In  England  the  National  Telephone  Company 
until  recently  has  had  a  practical  monopoly  of  the 
business,  both  trunk  and  exchange.  Its  annual 
charge  in  London  is  $100  ;  in  Manchester  and 
other  towns  and  cities,  generally  $50 ;  in  a  few  small 
towns,  $45.  Mr.  A.  R.  Bennett1  has  lately  been 
calling  attention  to  the  fact  that  the  rates  are  very 
high,  —  more  than  double  the  charges  in  many  other 
countries.  The  National  Company  has  stated  that 
the  Continental  systems  are  built  of  cheap  materi- 
als, pay  small  wages,  and  make  no  profit.  Mr.  Ben- 
nett replies  that  the  construction  in  some  places, 
where  the  lowest  rates  prevail,  is  of  the  very 
best,  superior  to  that  of  the  National  system.  For 
example,  in  Zutphen,  Holland,  the  rate  is  $14.45 
a  year  inclusive  of  all  charges,  with  metallic  cir- 

1  Mr.  Bennett  has  been  for  years,  in  fact,  since  1880,  a  leading 
electrical  engineer,  having  been  General  Manager  and  Chief  En- 
gineer of  several  important  systems,  and  for  some  time  Chief 
Engineer  of  the  National  Telephone  Company  for  Scotland  and 
Ireland. 


320  MUNICIPAL  MONOPOLIES. 

cuits  throughout,  stouter  baonze  wire  than  the 
National  uses,  the  finest  instruments,  all  night  ser- 
vice, and  4.2  percent  dividends.  The  co-operative 
telephone  system  of  Aarhus,  in  Denmark,  the  sys- 
tems of  Chris tiania,  Stockholm,  Zurich,  Trondhjem, 
and,  in  fact,  the  whole  of  the  Norwegian,  Swedish, 
Swiss,  and  Belgian  services  were  instanced.  Metal- 
lic circuits  are  universal  in  Sweden,  practically  so 
in  Belgium,  France,  and  Bulgaria,  and  largely  in 
use  in  Switzerland,  Norway,  and  Luxemburg,  single 
construction  being  regarded  as  obsolete  even  in  Ser- 
via  and  Roumania,  while  the  English  lines  continue 
to  be,  in  large  part,  single  wire.  Mr.  Bennett  tab- 
ulated the  wages  paid  in  Continental  Europe,  and 
showed  that  for  telephone  construction  they  were 
nearly  the  same  as  in  England,  while  for  operation 
they  averaged  more  than  in  England.  He  also 
proved  that  the  telephone  in  the  low-rate  countries 
realized  a  profit  above  interest,  depreciation,  and 
cost  of  operation,  and  brought  out  the  fact  that  the 
great  trouble  with  the  National  was  that  its  capital 
was  water-logged  to  such  an  extent  that  the  real 
capital  must  earn  about  20  per  cent  in  order  to 
pay  5  per  cent  on  the  supposed  capital. 

At  the  hearings  of  the  recent  Select  Committee 
of  Parliament  on  the  Telephone,  the  National 
Company  admitted  that  its  stock  was  watered  to 
the  extent  of  £1,292,000,  or  about  $6,460,000  on 
73,338  miles  of  line.     Mr.  Bennett  says  that  those 


THE  TELEPHONE.  321 

who  have  studied  the  subject  estimate  the  water 
to  be  much  more  than  this;  but,  accepting  the 
company's  own  figures,  the  water  is  $87.75  per 
line.  The  Dundee  and  District  Telephone  Com- 
pany's lines  in  England  cost  $75  each.  The  Mutual 
Telephone  Company's  lines  (double  wires)  in  Man- 
chester cost  $84  each.  The  Christiania  Telephone 
Company's  lines  cost  $60  each ;  and  the  Trondhjem 
municipal  lines  cost  $50.50  each,  including  the 
purchase  money  paid  to  the  original  company, 
which  was  nearly  all  waste.  It  appears,  therefore, 
that  the  water  in  the  National,  on  its  own  show- 
ing, is  more  than  the  actual  cost.  The  assessment 
committee  in  1890  valued  the  company's  wires  in 
South  London  at  $7.50  per  mile  of  single  wire;  in 
view  of  increase  of  business,  the  value  was  made 
$12.25  per  mile  in  1895.  It  appears  that  the  com- 
pany gets  more  than  the  value  of  its  plant  in  the 
annual  rates  of  a  single  year,  even  at  the  provin- 
cial charge,  to  say  nothing  of  the  $100  London 
tax;  and  every  three  years  (two  in  London)  it 
receives  its  entire  original  investment  over  and 
above  all  operating  expenses.  Mr.  Bennett  visited 
a  number  of  countries  in  Europe,  and  carefully 
studied  their  telephone  systems.  His  conclusion, 
expressed  in  his  books,  magazine  articles,  and  ad- 
dresses, is  that  a  good  profit  can  be  made,  and  is 
made,  on  a  $12.50  rate  in  small  places,  and  a  $25 
rate  in  large  places;  and  that  the  best  instruments 


322  MUNICIPAL  MONOPOLIES. 

and  metallic  circuits,  with  excellent  service,  can 
be  furnished  in  England  at  a  profit  on  a  $20  an- 
nual charge  in  places  of  10,000  people,  825  in 
places  of  100,000  to  150,000,  and  $40  in  London, 
with  its  4,000,000  and  more  of  people. 

There  have  been  several  attempts  at  competition 
in  England.  In  Dundee,  when  the  National  was 
charging  $100,  a  company  was  formed  with  a  $50 
rate.  The  National  dropped  to  $25  and  the  Dun- 
dee local  to  $27.50  for  any  distance.  It  paid  9 
per  cent  dividends  during  the  4^  years  of  its  exist- 
ence. It  was  bought  out  by  the  National,  and  rates 
put  up  to  $50.  The  National  paid  the  Dundee 
Company  its  whole  capital,  plus  a  bonus  of  40  per 
cent.  The  subscription-list  shrank  to  about  half 
when  the  rates  were  doubled.  The  Sheffield  Com- 
pany paid  good  dividends  on  a  $35  rate.  The  Na- 
tional opposed  this  with  a  $25  charge,  and  finally 
bought  it  out.  The  Globe  began  with  a  $50  rate, 
but  was  bought  out  at  an  early  stage  that  the 
$100  rate  might  be  maintained.  The  Mutual,  in 
Manchester,  started  in  1891  with  a  $25  rate  for 
shareholders  and  $30  for  the  general  public.  The 
average  subscription,  after  deducting  the  10  per 
cent  postal  royalty,  was  $23;  and  it  paid  2.29 
per  cent  dividends  per  year  after  putting  away  5 
per  cent  as  a  reserve.  This  company,  too,  has 
been  bought  off  to  maintain  the  monopoly  rate  of 
in   Manchester.      The   Select   Committee  of 


THE   TELEPHONE.  323 

Parliament  was  told  that  if  the  National  Company 
were  relieved  of  extraneous  charges  (10  per  cent 
post-office  royalty  and  taxes),  the  subscription 
would  be  reduced  to  f31.45 ;  but  the  company  told 
the  Manchester  Council,  during  its  investigation, 
that  out  of  the  $50  charge  $40  went  to  expenses, 
$5  to  the  government,  and  $5  to  dividends  and 
renewals. 

The  National  Company's  service  has  been  un- 
satisfactory, both  by  omission  and  commission,  — 
no  telephoning  of  telegrams  or  telephonograms  or 
mail-matter,  no  half-rates  on  trunk-line  talks  at 
night,  high  rates  per  year  and  per  talk  on  the 
trunk-lines,  delay  in  making  connections,  and  nu- 
merous interferences  on  the  lines.  The  English 
electrical  journals  have  been  full  of  complaints  for 
a  long  time,  and  at  frequent  intervals  questions 
are  raised  in  Parliament  as  to  what  the  policy  of 
the  post-office  is  to  be  in  reference  to  improving 
the  telephone  service. 

In  pursuance  of  the  Act  of  1892,  the  English 
post-office  has  been  building  and  buying  trunk- 
lines.  It  completed  the  purchase  of  the  National 
Company's  trunk-lines  in  1896.  For  2,651  miles 
of  trunk-lines,  £459,114  was  paid,  with  29,000 
miles  of  heavy  wire,  —  a  rate  of  =£16  or  $70  per 
mile  of  wire.  The  charges  on  the  postal  trunk- 
lines  are  6  cents  for  25  miles,  12  cents  for  50,  18 
cents  for  75,  25  cents  for  100  miles,  and  12  cents 


324  MUNICIPAL  MONOPOLIES. 

more  for  each  additional  40  miles  or  fraction 
thereof,  —  high  in  comparison  with  the  usual  Eu- 
ropean rates,  but  low  compared  to  those  charged 
in  the  United  States.  The  post-office  has  twelve 
or  thirteen  hundred  subscribers  on  exchange  lines. 
The  rates  stated  in  the  official  Postal  Guide  are 
$47  to  |62  metallic  circuit  within  a  mile  of  an 
exchange  in  London;  $37  to  $52  elsewhere;  and 
for  single  wire,  $37  to  $47  in  London,  and  $32  to 
$42  elsewhere.1 

The  post-office  has  not  reduced  its  exchange 
rates,  nor  made  any  effort  to  compete  with  the 
companies.  On  the  contrary,  it  has  deprecated 
competition  in  local  telephony  as  a  very  serious 
evil,  and  has  preferred  to  await  the  time  when 
the  whole  service  may  become  public,  without  the 
breaks,  duplications,  and  conflicts  incident  to  com- 
peting exchanges. 

The  English  Postal  Regulations  say,  "  Local 
messages  to  the  renter  of  telephones,  handed  in  at 
the  post-office  into  which  the  wire  is  led,  are  sent 
over  the  private  wire  free,  and  messages  called  for 
at  the  post-office  are  also  delivered  free.  These 
messages,  if  sent  over  a  private  wire  to  a  post-office 

1  The  preoccupation  of  the  hetter  part  of  the  territory  hy  the 
National  Company,  the  dislike  of  the  post-office  to  competition  in 
telephone  exchanges,  and  the  natural  inertia  of  men,  have  hitherto 
prevented  the  English  people  from  attaining  the  benefits  which 
could  he  realized  from  a  good  telephone  system  under  the  manage- 
ment of  their  post-office. 


THE   TELEPHONE.  325 

before  the  hour  of  closing  the  ordinary  letter-box 
to  the  public,  are  subject  to  a  fee  of  Id.  (and  3d.  if 
before  the  closing  of  the  late  box),  in  addition  to 
the  charge  for  postage." 

Telegrams  are  to  be  telephoned  free  to  and  from 
the  postal  telephone  subscribers  ;  and  the  Post- 
office  Telegraph  Department  has  lately  arranged 
with  the  National  Company  to  receive  telegrams 
from  its  subscribers,  even  proposing  to  pay  the 
National  a  subsidy  for  the  service. 

The  English  Postmaster-General  says  (March, 
1897),  that  the  government  has  no  intention  of 
buying  the  company  exchanges ;  that  in  December, 
1911,  the  company  will  cease  to  have  any  right  to 
do  business,  and  all  it  will  have  to  sell  will  be  its 
physical  plant,  which  the  government  will  not  be 
obliged  to  buy.  The  post-office  has  shown  a  strong 
wish  to  prevent  the  building  of  competing  plants 
in  the  same  locality,  with  a  view,  probably,  to 
smaller  cost  in  1911,  when  the  government  may 
very  likely  wish  to  buy  the  whole  system.  Com- 
peting exchanges  in  the  same  place  are  very  dis- 
advantageous, producing  delay  and  difficulty  in 
communicating  from  one  system  to  another,  wast- 
ing labor  and  material,  and  compelling  many  per- 
sons to  pay  annual  charges  in  two  companies  instead 
of  one.  In  pursuance  of  this  policy,  the  govern- 
ment has  even  refused  to  grant  a  license  for  a 
municipal  exchange  in  Glasgow,  though  the  city 


326  MUNICIPAL  MONOPOLIES. 

earnestly  petitioned  for  it  some  years  ago,  and  has 
again  this  year  (1897)  urged  it  with  great  force 
and  unanimity. 

The  United  States. 

In  the  United  States  the  telephone  business  is 
largely  controlled  by  the  Bell  Telephone  Monop- 
oly.1 It  was  expected  that  the  Bell  patents  would 
expire  in  1898 ;  but  in  November,  1891,  the  public 
was  surprised  to  learn  that  a  new  patent  had  just 
been  issued  to  the  Bell  Company  (as  the  assignee 
of  Emil  Berliner),  covering  the  identical  micro- 
phone transmitter  which  they  had  controlled  for 
13  years,  and  which  they  could  now  control  under 
a  new  patent  for  17  years  more.  The  original 
Bell  patent  was  issued  March  7,  1876.  Edison, 
Berliner,  and  Blake  subsequently  invented  im- 
provements, which  were  all  bought  up  by  the  Bell 
Company,  and  a  patent  secured  by  it  in  1881  on 
the  Blake  invention,  which  constituted  a  perfected 
application  of  all  the  others.  Applications  were 
also  filed  for  patents  on  the  Berliner  and  Edison 
ideas.  After  long  delay  a  patent  was  granted  on 
the  Berliner  claim,  his  invention  having  antedated 
Blake's.  Berliner's  application  was  filed  June  4, 
1877,  the  Bell  Company  bought  it  in  1878,  and 

1  United  States  Statistical  Abstract,  January,  1897,  title, 
"Telephone." 


THE  TELEPHONE.  327 

the  patent  was  issued  Nov.  17,  1891.  The  Fed- 
eral Government  brought  suit  to  set  aside  the  pat- 
ent, (1),  because  of  the  extraordinary  delay  which 
was  in  the  nature  of  a  fraud  on  the  public ;  (2), 
because  of  irregularities,  collusions,  etc.,  in  the  Pat- 
entrOffice  aside  from  delay ;  and  (3),  because  the 
subject  matter  was  covered  by  the  Bell  patent  of 
1876.  Counsel  for  the  United  States  asked  whether 
a  company  should  be  allowed  to  nurse  applications 
for  patents,  and  take  out  a  patent  on  the  Berliner 
application  in  time  to  overlap  the  Bell  patent,  and 
afterwards,  perhaps,  secure  a  patent  on  the  Edison 
application  in  time  to  overlap  the  Berliner  term, 
so  obtaining  a  monopoly  for  three  times  the  statu- 
tory period.  The  government  introduced  evidence 
to  show  collusion  with  and  bribery  of  patent  offi- 
cials, and  the  Circuit  Court  set  aside  the  patent; 
but  the  United  States  Supreme  Court  reversed  the 
decision,  holding  that  there  was  not  sufficient  evi- 
dence of  fraud.  (United  States  vs.  American  Bell 
Telephone  Company,  167  U.  S.,  224,  decided  May 
10,  1897.) 

The  American  Bell  Telephone  Company  (the 
Bell  proper)  has  its  head-quarters  in  Boston. 
Thirty-odd  subsidiary  companies,  largely  organized 
and  controlled  by  Bell  interests,  operate  exchanges 
and  trunk-lines  throughout  the  country,  under  li- 
cense from  the  Bell.  The  Bell  proper  retains  the 
ownership  of  all  the  telephone  instruments  used 


328  MUNICIPAL  MONOPOLIES. 

by  these  companies,  receiving  a  rent  of  about  $6  a 
year  for  each  compound  telephone  (transmitter  and 
hand  phone).  The  sub-companies  keep  the  annual 
sums  paid  by  their  subscribers,  less  the  $6,  which 
goes  to  the  Bell. 

The  standard  rate  for  metallic  service,  unlimited, 
is  $240  in  New  York,  $96  to  $180  in  Boston  within 
a  mile  of  an  exchange,  $100  to  $250  in  Philadel- 
phia. Recently  what  is  called  "measured  service" 
has  been  introduced  into  these  cities  and  some 
others.  For  example,  in  Philadelphia,  within  a 
mile  of  an  exchange,  the  following  charges  are 
made  for  measured  service  with  metallic  circuit :  — 


i.  of  Calls. 

Yearly  Rate. 

Extra  Calls,  Each. 

800 

$  90.00 

8  cents. 

1,000 

102.00 

7     " 

1,200 

112.00 

6     " 

1,800 

136.00 

5    " 

2,400 

156.00 

5    " 

Intermediate  service  at  intervals  of  200  calls 
may  be  had  at  proportional  rates,  and  beyond 
2,400  calls  the  charge  is  $6  for  each  200.  For  a 
two-party  circuit  each  subscriber  pays  about  one- 
fifth  off  the  above  rate  for  the  same  number  of  calls. 
Extra  calls  are  charged  at  5  cents  to  8  cents  each. 
The  lowest  rate  in  Philadelphia  is  $60  for  600 
calls  a  year  on  a  two-party  circuit  within  a  mile. 

In  New  York  the  direct-line  measured  service  is 
as  follows :  — 


THE  TELEPHONE.  329 


cal  Messages. 

Annual  Rate. 

Additional  Loc 

al  Messages. 

GOO 

90 

10  cents  each. 

700 

98 

10 

" 

tt 

800 

106 

9 

<< 

ti 

900 

113 

9 

CI 

a 

1,000 

120 

7 

a 

a 

1,100 

125 

7 

" 

<< 

1,200 

130 

7 

a 

a 

1,300 

135 

7 

" 

a 

1,400 

140 

7 

a 

a 

1,500 

145 

6 

a 

a 

From  1,000  to  1,500,  additional  messages  are  $5 
a  hundred ;  from  1,500  to  2,000,  $4  per  hundred, 
or  6  cents  each;  and  above  2,000  they  are  $3  a 
hundred,  or  5  cents  each. 

In  Boston  the  lowest  measured  direct  service, 
800  calls,  is  $90  for  a  business  house,  and  $60  for 
a  residence. 

In  Chicago  the  following  rates  obtain :  — 

Annual  Kate,  Annual  Rate, 

Met.  Circuit.       Grounded  Circuit. 

Residence,  Four-Party  line,*        $  60 

Residence,  Independent,2  .  125  $100 

Business  Place,  Independent,2       175  125 

This  table  gives  all  the  rates  not  subject  to  re- 
bate ;  but  column  1  in  the  tariff  makes  the  rate  for 
each  100  calls  $6  up  to  1,500  calls,  with  8  cents 
for  each  added  message,  then  $5  a  hundred  up  to 
4,000,  with  7  cents  for  each  extra  call  above  the 
number  agreed  upon. 

1  i.e.,  Four  subscribers  on  one  line. 

2  i.e.,  Only  one  subscriber  on  a  line. 


830  MUNICIPAL  MONOPOLIES. 

In  Detroit  the  charges  (Bell)  used  to  be  175  to 
$150.  But  the  rates  given  by  the  Detroit  Tele- 
phone Company,  started  two  years  ago,  are  $25  to 
$30  residence,  and  $40  to  $45  business.  A  new- 
company  has  been  organized  in  Indianapolis  with 
$24  and  $40  rates.  In  towns  the  usual  Bell 
charges  are  $36  house  and  $48  business  for  local 
service  within  ten  miles,  and  $75  or  more  for  con- 
nection with  a  city  if  one  is  near. 

The  enormity  of  these  charges  becomes  clear 
when  it  is  known  that  responsible  parties  are  of- 
fering to  supply  telephone  services  in  this  country 
at  $1  to  $2  a  month  in  towns,  and  $2.50  in  the 
largest  cities. 

A  few  places  are  reported  as  having  rates  of  $8 
a  year  for  house  phone,  and  $12  a  year  for  busi- 
ness station.  A  number  of  cases  of  exchange 
rates,  $18  house  and  $24  business  place  per  year, 
are  reported  in  the  Electrical  journals  for  the  last 
two  years.  A  man  of  large  affairs  tells  me  that 
the  interests  he  represents  propose  to  wire  New 
England  on  the  basis  of  a  nickel  a  day  except  in 
the  larger  cities.  The  Standard  Telephone  Com- 
pany in  Philadelphia  offers  good  metallic  under- 
ground circuits  and  fine  instruments  at  $50  house 
and  $75  business,  and  are  now  putting  in  wires  for 
a  large  number  of  subscribers.  A  good  company  in 
Chicago  offers  telephone  service  at  $30  a  year ;  and 
a  citizens'  company  in  St.  Louis  has  been  organized 


THE   TELEPHONE.  331 

with  a  large  capital  to  furnish  telephone  service 
at  $36  house,  $50  physicians,  $ 60  business  house. 
The  present  Bell  rates  are  $100.  (Traffic,  Febru- 
ary, 1897.) 

The  directors  of  the  People's  Telephone  Com- 
pany of  New  York,  which  originated  with  some 
of  the  influential  members  of  the  New  York  Board 
of  Trade,  have  given  out  a  statement  (October, 
1898),  to  the  effect  that  they  will  give  subscri- 
bers a  first-class  modern  telephone  service  at  less 
than  half  the  present  Bell  rates,  —  for  unlimited 
service,  $100  instead  of  $240  in  New  York,  and 
$75  instead  of  $150  in  Brooklyn.  The  measured 
service  rates  in  New  York  will  be  $40  for  400 
calls  in  place  of  $90  for  600  calls.  For  residences 
the  measured  rate  for  service  on  private  wires 
will  be  $30.  To  families  living  in  apartment 
houses  and  flats  an  unlimited  service  connecting 
with  all  the  other  subscribers  of  the  company  will 
be  given  for  $1  per  month  on  group  lines.  The 
company  proposes  that  the  subscribers  shall  be- 
come stockholders,  "so  that  the  telephone  users 
here  will  become  the  controlling  power  in  its 
affairs."  In  other  words,  the  company  is  to  be 
co-operative,  on  the  same  principle  as  the  Wood 
County  Company  (see  editor's  note  below)  ;  and 
the  dividends  may  reduce  the  actual  cost  of  the 
telephone  to  the  subscribers  much  below  the  sched- 
ule rates,  as  is  the  case  with  the  Wood  Company. 


332  MUNICIPAL   MONOPOLIES. 

We  have  seen  that  in  Norway,  Sweden,  Den- 
mark, Finland,  Luxemburg,  Austria,  Belgium, 
France,  and  Switzerland,  telephone  exchange  ser- 
vice is  furnished  by  co-operative  societies,  munici- 
palities, states,  and  private  companies,  at  an  annual 
charge,  usually  varying  from  $10  to  $16  in  the 
towns  and  smaller  cities,  to  $20,  $25,  or  $30  in 
the  largest  cities.  The  construction  in  Sweden, 
Belgium,  and  many  parts  of  Norway,  France,  and 
Switzerland,  is  better  than  it  is  here  as  a  rule. 
The  wages  paid  for  operation  differ  but  little  from 
the  average  here,  —  the  telephone  girl  seeming  to 
be  regarded  the  world  over  as  a  sort  of  an  angel, 
able  to  subsist  on  dreams.  The  service  here  can- 
not compare  at  all  with  the  service  in  Europe. 
We  have  no  express  talks,  no  telephonograms,1  no 
telephoning  of  mail-matter,  and  practically  no  tele- 
phoning of  telegrams.1 

1  In  Copenhagen,  with  a  third  of  a  million  people,  city  mes- 
sages t\  ill  he  taken  from  a  subscriber  and  delivered  by  messengers 
for  lj  cents,  plus  £  cent  per  word,  or  10  words  for  4  cents  (the 
minimum  charge),  20  words  for  6£  cents,  etc.  Messages  may  be 
sent  to  subscribers  at  the  same  rates.  In  Madrid,  half  a  million 
population,  and  in  all  the  Spanish  exchanges,  the  message  rates 
to  or  from  a  subscriber  are  4  cents  for  20  words,  and  1  cent  for 
each  5  words  thereafter.  These  charges  include  delivery,  and 
constitute  a  local  telegraph  service  at  very  low  rates.  Our  local 
telegraph  service  costs  20  cents  for  10  words. 

2  The  telephone  books  in  some  of  our  cities,  Philadelphia  for 
example,  state  that  the  subscriber  will  be  connected  with  the 
telegraph  office  for  the  sending  of  telegrams  to  and  from  him, 
provided  he  arranges  with  the  telegraph  company  to  perform 
the  service.    For  some  reason,  perhaps  because  very  few  of  the 


THE   TELEPHONE.  333 

Subscribers  cannot  use  the  public  stations  free, 
as  is  generally  the  case  in  Europe,  but  must  pay 
the  regular  rates.  If  a  subscriber  or  other  person 
asks  to  have  a  party  called  to  a  public  telephone 
station  in  order  to  converse  with  him,  the  company 
collects  the  toll  charge  (not  less  now,  1898,  than 
15  cents,  in  a  city  like  New  York  or  Philadelphia), 
plus  messenger  service,  the  latter  charge  being  in 
the  majority  of  cases  practically  prohibitive.  One 
has  to  call  the  central  office  if  one  wants  this  mes- 


subsciibers  know  about  the  service,  the  number  of  telegrams 
telephoned  is  very  small.  The  Postal  Telegraph  Company  in 
Philadelphia  has  arrangements  with  50  or  60  subscribers,  and  the 
Western  Union  has  agreements  with  12  or  15  more,  —  less  than  100 
out  of  8,200  telephone  subscribers  in  a  population  (Philadelphia 
and  Camden)  of  about  one  and  one-half  millions;  whereas,  in 
many  European  countries,  every  subscriber  has  the  privilege. 
The  Western  Union  does  not  care  to  make  such  arrangements 
except  with  subscribers  whose  telegrams  will  amount  to  $3  to  $5 
a  week,  or  more,  and  who  are  situated  at  outlying  points,  far 
from  any  telegraph  office.  The  telegraph  company  does  not  care 
to  make  the  telephone  too  interesting,  and  vice  versa.  The  mes- 
sages telephoned  in  Philadelphia  do  not  exceed  one  in  every  200 
telegrams,  and  on  the  Western  Union  lines  one  in  1,000,  as  against 
one  in  every  8  for  Belgium.  In  France  25  telegrams,  on  the  aver- 
age, are  telephoned  for  each  subscriber  per  year ;  in  Belgium  100, 
in  Switzerland  15,  in  Norway  9,  in  Christiania  10,  in  Philadel- 
phia not  over  4.  Where  there  is  more  than  one  telephone 
company,  only  one  is  likely  to  be  able  to  make  any  arrangements 
for  telephoning  telegrams  to  and  from  its  subscribers,  even  if  it 
should  undertake  to  do  so.  It  is  held  no  discrimination  to  give 
one  telephone  company  a  monopoly  of  such  agreements, — the 
telegraph  may  choose  its  own  agencies  for  the  receiving  and  de- 
livering of  messages.  (People  ex.  rel.  Cairo  Telephone  Company 
vs.  Western  Union  Telegraph  Company, 46  N.  E.  Rep.,  731,  April 
30,  1897.) 


334  MUNICIPAL   MONOPOLIES. 

senger  service.  This  very  day  the  writer  asked 
the  charge  for  sending  a  messenger  to  19  th  and 
Columbia  Avenue,  Philadelphia  (less  than  a  half- 
hour's  ride  by  street-car),  to  ask  a  friend  of  mine 
to  go  to  the  nearest  public  station.  The  reply 
was  40  cents.1  This,  with  the  15-cent  toll,  would 
make  55  cents 2  for  a  service  that  would  have  cost 
7  cents  in  Luxemburg  if  rendered  to  a  subscriber, 
and  14  cents  if  rendered  to  a  non-subscriber  (7 
cents  for  messenger  and  7  cents  for  telephone  talk 
of  5  minutes).  In  Christiania  the  said  service 
would  have  cost  twelve  cents  (5  cents  of  it  for 
the  messenger)  ;  in  Stockholm  the  cost  would  be 
11  cents  (Q\  cents  of  it  for  the  messenger);  in 
Belgium  it  costs  only  5  cents  to  send  a  message  to 
a  person  in  the  same  city  or  in  the  same  district, 
asking  him  to  come  to  a  telephone  station,  and 
fixing  the  time  and  place — 6|  cents  if  the  per- 
son  is    in  a  distant   place.     In    Copenhagen   no 


1  The  Long  Distance  Telephone  Company  is  more  reasonable 
in  respect  to  messenger  service,  their  charge  being  uniformly  15 
cents.  If  one  is  in  Boston,  and  wishes  to  talk  with  a  person  in 
New  York,  Philadelphia,  Chicago,  or  any  other  city  on  the  long- 
distance lines,  the  company  will  make  the  appointment  for  him  for 
15  cents.  Then  if  he  gets  the  connection  with  a  party  in  Phila- 
delphia, say,  you  have  to  pay  $3  for  5  minutes,  and  one-fifth  of  the 
initial  charge,  or  60  cents  in  this  case,  for  each  added  minute,  and 
you  can  talk  all  day  if  you  wish. 

2  Such  charges  are  prohibitive.  I  have  called  at  a  consider- 
able number  of  public  stations,  and  have  yet  to  find  an  attendant 
who  knows  of  any  case  of  such  messenger  service  being  ren- 
dered. 


THE  TELEPHONE.  335 

charge  at  all  is  made  for  sending  a  messenger  to 
call  a  non-snbscriber  to  a  public  station  to  converse 
with  a  subscriber. 

It  is  usual  for  telephone  companies  here  and  in 
England  to  make  a  rule  forbidding  the  use  by 
non-subscribers  of  the  instruments  belonging  to 
subscribers.  This  rule  is  generally  put  into  the  con- 
tract, and  the  company  claims  the  right  to  remove 
the  telephone  in  case  the  provision  is  violated.  It 
is  held,  however,  that  telephone  companies  are 
common  carriers,  and  must  furnish  telephones  and 
facilities  for  communication  for  all  persons  with- 
out discrimination.  In  some  States  this  is  provided 
for  by  statute,  but  it  is  equally  true  at  common 
law.1  The  courts  will  issue  a  mandate  to  compel 
a  telephone  company  to  furnish  a  party  within 
its  area  with  telephone  instruments,  and  make  the 
usual  connections,  and  render  the  usual  service.2 

An  interesting  case  occurred  in  Indiana  in  1896. 
August  Fehring  was  a  subscriber  of  the  Central 
Telephone  Company,  and  had  a  phone  in  his  drug- 
store. He  permitted  Dr.  Hudson  to  use  his  phone 
in  order  to  call  his  carriage  from  a  livery  stable. 
Dr.  Hudson  had  been  a  subscriber,  but  had  had  a 
misunderstanding  with  the  company,  and  had 
ceased  to  have  a  phone  at  his  house.     It  appears 

i  Central  Union  Telephone  Co.  vs.  State,  118  Ind.,  194,  206, 
207. 

2  Ibid.,  State  vs.  Telephone  Company,  .36  Ohio  State,  296. 
Bell  Telephone  vs.  Commonwealth,  3  At.  Rep.,  825  (Peun.). 


336  MUNICIPAL   MONOPOLIES. 

that  the  attendant  recognized  the  doctor's  voice, 
or  asked  who  it  was ;  and  the  telephone  office  dis- 
covered that  the  connection  was  wanted  by  Dr. 
Hudson.  Thereupon  the  company  refused  to  make 
the  connection  unless  Mr.  Fehring  -would  give 
assurance  that  Dr.  Hudson  should  not  use  the 
phone.  Mr.  Fehring  would  not  do  this,  but 
brought  suit  against  the  company  and  recovered.1 
The  conversation  rates  here  are  about  as  exor- 
bitant as  the  annual  rates.  In  our  large  cities  15 
cents  is  the  minimum  charge  for  the  local  use  of 
the  telephone  by  the  general  public,  —  three  times 
the  charge  in  Berlin.  In  our  small  towns  10  cents 
is  the  minimum  Bell  Company  conversation  rate 
for  the  public,  twice  the  ordinary  European  charge 
where  cities  and  towns  are  averaged  in  one  uniform 
rate,  and  four  times  the  Trondlijem  rate,  estab- 
lished by  the  municipal  management. 

In  Austria  the  rate  for  an  interurban  talk  is  12  cents 
•within  30  miles,  20  cents  within  62  miles,  30  cents  within 
94  miles,  and  beyond  that  to  any  distance,  40  cents.  In 
Switzerland  the  rate  is  6  cents  within  30  miles,  10  cents 
within  62  miles,  any  distance  beyond  that,  15  cents.  For 
distances  within  30  miles  in  the  United  States  the  charge 

1  The  suit  was  brought  under  the  Indiana  statute  against 
discrimination,  which,  however,  is  merely  declaratory  of  the  com- 
mon law  (see  cases  cited  in  preceding  notes),  except  that  it  affixes 
a  definite  penalty  of  $100  for  each  offense,  whereas  the  common 
law  leaves  the  damages  in  each  case  to  he  assessed  according  to 
the  circumstances. 


THE  TELEPHONE.  337 

runs  from  15  cents  to  35  cents ;  and  35  cents  to  60  cents 
or  more  up  to  60  miles ;  for  longer  distances  the  charges 
run  out  of  sight.  Subscribers  in  Stockholm  have  free 
interurban  communication  within  43  miles,  and  those  of 
Copenhagen  have  free  communication  within  53  miles. 
In  Luxemburg  all  interurban  conversation  is  free  on  a  $16 
annual  inclusive  exchange  rate. 

From  Berlin  to  Breslau  is  218  miles,  or  a  few  miles 
more  than  from  Philadelphia  to  Norwich,  Conn.  The  rate 
in  the  first  case  is  24  cents,  in  the  second  $2.25  day  and 
$1.15  night.  The  rate  to  Pittsburg,  only  a  few  miles  far- 
ther, is  $3  day  and  $1.50  night ;  to  Niagara,  double  the 
German  distance,  $4  and  $2  ;  to  Boston,  304  miles,  $3  and 
$1.50 ;  to  Cincinnati,  about  three  times  as  far  as  Berlin  to 
Breslau,  $6.50  day  and  $3.25  night;  to  Chicago,  820  miles 
from  Philadelphia,  $8  and  $4.  Conversations  are  held  in 
Germany  over  distances  of  500  miles.  In  France  the  charge 
for  304  miles  would  be  50  cents,  instead  of  $3  as  between 
Philadelphia  and  Boston  ;  and  70  cents  for  436  miles,  in- 
stead of  $4  as  from  Philadelphia  to  Niagara.  There  is  a 
nominal  time  limit  of  three  minutes  between  distant  places 
in  Germany,  and  five  minutes  in  this  country  and  France ; 
but  these  limits  are  not  enforced  except  when  the  wires  are 
rushed. 

The  English  "  Post-Ofnce  Guide "  says,  "  Where  tele- 
phone exchanges  in  different  towns  are  connected  by  trunk- 
lines,  such  lines  may  be  used  for  conversation  by  local  sub- 
scribers and  the  general  public  on  payment  of  the  following 
charges : 

Between  any  two  towns  — 
Within  twenty  miles  of  each  other,  —  threepence ; 
"      forty         "      "      "         "      —  sixpence ; 

and  so  on  at  the  rate  of  sixpence  for  every  additional  40 
miles  or  fraction  thereof ;  and  even  these  rates  have  been 


338  MUNICIPAL  MONOPOLIES. 

somewhat  reduced  since  the  Post-Office  bought  the  whole 
system  of  trunk-lines.  (See  above  under  title  '  Great 
Britain.') 

"  The  charge  to  the  general  public  for  conversation  with 
post-office  telephone  subscribers  in  the  same  town  is  three- 
pence for  three  minutes." 

From ,  where  these  words  are  written,  to 

B ,  is  7  miles,  and  the  telephone  rate  is  15 

cents  ;   to  P is  18  miles,  and  the  rate  is  25 

cents ;  in  each  case  the  English  postal  telephone 
rate  would  be  6  cents.  From  Boston  to  New  York, 
200  miles,  is  $2,  —  English  rate,  60  cents ;  New 
York  to  Philadelphia,  90  miles,  $1  —  English  rate, 
36  cents.  Here  we  have  two  tariffs,  one  under  pub- 
lie  oionership  and  one  under  private  ownership,  both 
expressly  framed  on  the  scale  of  distance  ;  and  the 
public  tariff  is  about  one-third  of  the  private  tariff 
for  the  same  distances.  The  English  postal  tariff, 
moreover,  is  high.  The  people  of  Trondhjem  can 
telephone  to  Svorkmo,  47  £  miles  away,  and  to  ten 
other  places  within  a  50-mile  radius,  for  6£  cents 
per  5-minute  conversation,  and  a  local  conversation 
costs  2  J  cents ;  these  are  the  rates  for  the  non- 
subscribing  public.  In  Germany  you  can  talk  all 
over  the  Empire  for  a  quarter,  and  in  the  first  two 
cases  of  this  paragraph  the  rate  would  be  twelve 
cents.  The  German  system  abandons  the  distance 
scale,  and  divides  interurban  communication  into 
two  classes,  near  and  far,  and  adopts  a  uniform 


THE  TELEPHONE.  339 

rate  for  each  class.  In  France  the  government 
tariff  is  on  the  scale  of  distance,  10  cents  for  each 
62  miles,  which,  for  long  distances,  amounts  to  about 
half  the  English  rate,  or  one-sixth  of  the  American. 
And  France  gives  half-rates  at  night,  and  commu- 
tation rates  still  loiver. 

In  Sweden  the  trunk-rates  are  4  cents  up  to  60 
miles,  8  cents  for  60  to  150  miles,  13£  cents  for 
150  to  360  miles,  greater  distances,  up  to  767 
miles,  27  cents.  From  Philadelphia  to  Chicago, 
about  the  same  distance  as  the  longest  Swedish 
line  named,  the  rate  is  $8.  From  New  York  to 
Chicago  it  is  $9.  The  trunk-rates  at  night  are 
half  the  day-rates,  as  in  France. 

In  1890  Mr.  F.  C.  Waite  (in  charge  of  Depart- 
ment of  "  True  Wealth,"  for  the  11th  Census) 
estimated  the  gross  receipts  of  the  telephone  at 
$16,000,000.  There  were  at  that  time  185,000 
subscribers  in  the  United  States  (  U.  S.  States  Ab- 
stracts) ;  so  that  the  estimated  receipts  were  about 
$87  per  subscriber,  in  tolls  and  annual  rates.  At 
the  beginning  of  1895  there  were  243,432  subscri- 
bers, and  at  the  end  281,695,  or  262,000  average  for 
the  year.  The  annual  rates  had  diminished  little, 
if  any,  and  the  tolls  had  increased ;  so  that  $23,000,- 
000  of  gross  receipts  are  indicated.  Now,  we  have 
for  that  year  (1895)  some  figures  that  enable  us  to 
make  a  very  interesting  estimate.  The  income  of 
the  Long  Distance  Company  was  $1,326,683,  and 


840  MUNICIPAL   MONOPOLIES. 

the  tolls  other  than  those  of  the  Long  Distance 
Company  were  reported  as  $ 2,355,488  (nearly  20 
cents  each  for  the  12,000,000  local  and  neighbor- 
hood toll  conversations  in  1895).  Wherefore,  sub- 
tracting $3,682,171  from  $23,000,000,  we  have 
$19,317,829  for  annual  rates,  or  $74  per  sub- 
scriber. In  a  few  cases  we  have  definite  reports 
from  the  sub-companies.  For  example,  the  New 
York  and  New  Jersey  Telephone  Company  is  re- 
ported in  Poor's  Manual  as  having  average  receipts 
of  $123  per  phone,  and  in  New  York  City  the 
average  reaches  $175  a  year  in  rentals  alone. 

The  Bell  Company  proper  reports  two-thirds  of 
its  receipts  as  profit. 

BeU  Profits  in  Thousands  of  Dollars. 

1897  1896  1895  1894  1893  1892 

Gross  Receipts,        $5,130  $4,327  $5,125  $4,848  $5,781  $5,100 

Expenses,                      961  944  1,911  1,724  1,855  1,689 

Profits,               $4,169  $3,383  $3,214  $3,124  $3,926  $3,411 

It  is  right  that  any  invention  should  yield  a 
profit,  but  $21,000,000  in  six  years  seems  pretty 
high.1 

1  The  expenses  are  made  up  as  follows:  — 

1896.  1897. 

Expenses  of  operation $499,052  $509,314 

Interest  and  taxes 303,731  273,962 

Legal  expenses 100,745  136,333 

Real  estate 40,118  41,561 

Miscellaneous 97  ■    •    • 

$943,743  $961,170 


THE   TELEPHONE.  341 

In  an  investigation  in  New  York,  the  sworn  testi- 
mony of  the  officers  of  the  Metropolitan  Telephone 
Company  showed  that  the  net  profits  of  that  com- 
pany were  474  per  cent  in  six  years  on  the  cash  cap- 
ital invested,  — 116  per  cent  in  the  year  1885,  over 
147  per  cent  in  1886,  more  than  145  per  cent  in 
1887 — pretty  good  profits!  While  the  rate  was 
|60,  then  raised  to  $150  and  again  to  8180,  the 
company  realized  -$2,843,454  net  in  six  years  on 
an  original  cash  investment  of  $600,000.  In  1895 
there  were  in  New  York  9,500  subscribers,  paying 

The  assets  of  the  company  are: 

1896.  1897. 

Telephones $1,537,761  $1,772,596 

Real  estate 1,046,126  1,052,696 

Stocks 50,511,149  52,827,205 

Merchandise  and  machinery  ....  17,484                   18,320 

Bills  and  assets  receivable 1,490,930  3,275,060 

Cash  and  deposits 900,271  1,833,964 

TOTAL $55,503,722  $60,779,841 

The  capital  stock  is  now  $25,886,300  ;  the  bonds,  $2,000,000; 
the  patent  account,  $12,399,047  ;  new  construction,  1897,  $8,712,914. 
The  statistics  of  operation  are :  — 

Telephones,  Dec,  1896    ....       772,627  Dec.  1897, —  919,121 

Exchanges,  Jan.  1,  1897      ...             967  Jan.  1898,—     1,025 

Branch  offices 832  937 

Miles  wire 536,845  626,400 

Number  of  circuits 264,465  295,904 

Number  employees 14,425  16,682 

Number  stations 325,244  384,230 

Number  daily  connections     .    .    2,630,071  3,099,472 

The  number  of  daily  calls  per  station  varies  in  different  ex- 
changes from  1.7  to  18,  averaging  8.1  for  the  whole  United  States. 
The  total  number  of  connections  per  year  in  the  United  States  is 
about  one  billion. 
January,  1897,  there  were  280,644  miles  of  wire  on  poles,  12,597 


342  MUNICIPAL   MONOPOLIES. 

an  average  of  $175  a  year.  Half  the  number  pay 
the  standard  rate,  $240 ;  3,000  pay  a  rate  based 
on  the  service  rendered ;  and  2,000  pay  rates  be- 
low $240  and  down  to  $150.  (  Electrical  World, 
March  9,  1895,  p.  309.) 

It  would  have  been  well  for  the  nation  to  have 
bought  the  patent  for  $100,000  (as  it  could  have 
done  in  the  early  eighties),  and  thrown  it  open  to 
public  use  by  establishing  postal  trunk-lines,  and 
leasing  franchises  to  municipalities  or  to  private 
persons    under  proper  guaranties   as   to  charges, 

on  buildings,  234,010  underground,  and  2,818  submarine.  January, 
1898,  tbere  were  327,315  miles  of  wire  on  poles,  13,776  on  build- 
ings, 282,634  underground,  and  2,675  submarine. 

Tbe  Bell  reports  show  that  the  company  values  a  telephone  in- 
strument at  about  $2. 00,  or  $4.00  for  the  pair  required  at  a  station. 

The  919,121  telephones  are  single  instruments,  counting  each 
transmitter  as  one  and  each  hand  phone  as  one,  instead  of  count- 
ing transmitter  and  hand  phone  together  as  one  telephone,  the 
way  we  do  ordinarily.  The  Bell  had  about  460,000  compound 
telephones  (transmitter  and  hand  receiver  together)  in  use  in  the 
United  States  and  elsewhere  at  the  end  of  1897,  part  of  them  in 
exchange  offices  and  public  stations,  but  mainly  in  the  hands  of 
the  subscribers. 

The  "  instruments,"  or  "  telephones,"  reported  by  the  Bell 
Company  are  usually  supposed  to  mean  complete  telephones 
according  to  the  ordinary  use  of  that  term,  including  both  trans- 
mitter and  hand  phone  as  one  telephone.  The  author  was  in- 
formed to  that  effect  last  year  by  a  telephone  official  who  should 
have  known  the  truth,  which,  as  he  is  now  informed  by  a  leading 
officer  of  one  of  the  great  sub-companies,  is  simply  that  the  Bell 
Company  in  their  report  counts  every  transmitter  as  a  telephone 
instrument  or  telephone,  and  every  hand  receiver  as  another 
telephone,  a  fact  which  clears  up  the  wide  discrepancy  between 
the  number  of  "stations"  and  the  number  of  telephones  stated 
in  the  report. 


THE  TELEPHONE.  343 

service,  etc.,  where  the  municipal  authorities  re- 
fused to  undertake  the  work.  This  would  have 
saved  the  people  many  millions,  and  given  them  a 
far  more  ample  telephone  service,  aiding  thereby 
the  development  of  the  country. 

High  charges  have  prevented  the  development 
of  telephoning  in  America.  The  number  of  per- 
sons to  each  exchange  telephone  is  much  higher 
here  than  in  many  European  countries ;  although 
our  city  population,  which  constitutes  the  chief 
user  of  the  telephone,  is  far  greater  in  proportion 
than  in  most  other  countries  considered. 

Number  of  Persons  to  Each  Telephone  Station  Connected 
with  an  Exchange.1 


A 

B 

c 

D 

1894-5 

1896 

1897 

1898 

Norway- 

144 

Sweden 

147 

115 

96 

85 

Luxemburg 

160 

Switzerland 
Denmark 

^140 
211 

118 

100 

88 

United  States 

2     260 

230 

190 

165 

1  All  the  figures  of  column  D  relate  to  the  middle  of  the  year. 
The  same  is  true  of  the  data  for  Great  Britain,  Switzerland,  and 
the  United  States  in  the  other  columns.  The  other  numbers  in 
column  C  refer  to  the  beginning  of  the  year  except  the  Swedish 
estimate,  which  dates  at  the  end  of  1897.  In  columns  A  and  B, 
most  of  the  data  relate  to  the  beginning  of  the  year.  The  Swiss 
figure  for  the  beginning  of  1896  was  128 ;  for  the  beginning  of  1897 
it  was  107 ;  and  for  the  beginning  of  1898  it  was  94.  Most  of  the 
data  of  column  A,  together  with  an  able  discussion  of  telephone 
distribution  by  A.  R.  Bennett,  will  be  found  in  the  London  Elec- 
trical Review  for  Sept.  27,  1895,  p.  374.  Some  of  the  figures  may 
vary  slightly  from  the  exact  truth  because  of  the  difficulty  of  esti- 
mating precisely  the  growth  of  population  between  census  years. 

2  In  June,  1898,  the  Bell   companies   had   422,600   exchange 


344  MUNICIPAL  MONOPOLIES. 


Number  of  Persons  to  Each  Telephone  Station  Connected 
with  an  Exchange—  Continued. 


A 

B 

c 

D 

1894-95 

1896 

1897 

1898 

Germany 

450 

397 

350 

Holland 

600 

Great  Britain 

636 

477 

414 

Belgium 

700 

680 

640 

France 

1,430 

1,220 

970 

Spain 

1,618 

Austria 

1,640 

1,300 

Italy 

2,530 

Hungary 

3,140 

2,170 

Portugal 

3,3V0 

Russia 

13,100 

7,000 

stations,  and  59,600  private  lines.  There  are  two  instruments  at 
each  station,  a  transmitter  and  a  receiver;  and  these,  with  the 
telephones  used  in  the  offices  of  the  companies  and  by  their  agents, 
make  a  total  of  more  than  a  million  Bell  instruments  in  the 
United  States.  It  has  not  been  possible  to  get  precise  data  as  to 
the  number  of  telephones  in  the  United  States  outside  of  the  Bell 
exchanges;  but  it  seems  conservative  to  estimate  the  total  num- 
ber of  exchange  stations  in  the  country  at  about  450,000,  which 
would  indicate  one  station  to  165  persons. 

There  are  about  as  many  telephones  in  this  country  as  in  the 
whole  of  Europe.  It  seems  remarkable  that  the  country  as  a 
whole  should  have  more  telephones  per  thousand  of  population 
than  the  city  of  Philadelphia,  yet  that  appears  to  be  the  result  of 
the  figures  given  out  by  the  companies.  The  Philadelphia  area 
is,  of  course,  much  better  telephoned  than  equal  areas  through 
the  country  as  a  whole ;  but  Philadelphia  contains  a  crowded 
mass  of  people  too  poor  to  afford  telephones,  and  another  class  too 
economical  to  pay  the  present  city  rates;  and  these  people  swell 
the  average  population  per  telephone  station  beyond  the  average 
in  many  places  where  perhaps  the  number  of  telephones  per  acre 
may  be  less  than  in  Philadelphia. 

Massachusetts,  the  Bell  home  and  our  best  telephoned  State, 
has  about  the  same  number  of  telephones  as  Switzerland,  and  a 
population  slightly  smaller  than  that  of  the  Swiss  Republic. 
The  average  use  of  the  telephone  differs  greatly  in  the  two  places. 
The  Swiss  have  to  pay  for  each  call,  and  are  besides  a  frugal 


THE   TELEPHONE.  345 

people,  so  that  by  the  last  report  local  calls  average  only  500  per 
year  for  each  subscriber,  while  in  Massachusetts  each  subscriber 
averages  2,500  calls  per  year  from  his  station  for  exchange  service ; 
and  at  the  central  office  in  Boston  the  calls  on  unlimited  service 
lines  average  over  6,000  a  year  for  each  subscriber. 

United  States  Consul  J.  C.  Monaghan  sent  question  cards  to 
the  various  countries  of  Europe,  and  states  the  results  in  his 
report  from  Chemnitz,  Feb.  20,  1898.  His  data  are  not  dated,  but 
seem  to  relate  for  the  most  part  to  1896.  They  are  as  follows: 
Number  of  inhabitants  to  each  telephone  in  Sweden,  115 ;  in 
Switzerland,  129;  in  Luxemburg,  160;  in  Germany,  397;  in  Hol- 
land, 615;  in  Belgium,  682;  in  France,  1,216;  in  Austria,  1,318; 
in  Spain,  1,597;  in  Hungary,  2,168;  in  Italy,  2,629;  in  Russia, 
6,988;  in  Bulgaria,  13,616;  in  Roumania,  16,042.  Turkey  and 
Greece  have  no  telephones.  A  comparison  of  the  consul's  re- 
sults with  those  in  the  table  suggests  that  in  Italy  and  Holland 
population  may  be  increasing  faster  than  telephone  stations.  I 
am  inclined  to  think,  however,  that  in  the  case  of  Italy  the  list 
of  telephone  stations  sent  to  the  consul  was  not  complete.  In 
some  of  the  statements  that  appear  from  time  to  time  in  news- 
papers and  periodicals,  private  lines  are  included  as  well  as 
exchange  stations,  the  population  at  the  last  census  is  sometimes 
taken  without  allowance  for  the  increase  between  the  census  year 
and  the  date  of  estimate,  and  occasionally  the  total  number  of 
instruments  is  stated  as  the  number  of  subscribers,  thus  doubling 
or  more  than  doubling  the  true  number. 

Norway,  Sweden,  and  Switzerland  are  the  best  telephoned 
countries  in  the  world.  Nowhere  else  does  the  service  approach 
so  near  to  what  it  is  capable  of  accomplishing  for  the  people. 
Luxemburg  and  Denmark  are  not  far  behind  the  Scandinavian 
nations.  In  all  these  countries  the  rates  are  very  low,  and  rural 
intercourse  is  highly  developed.  Leaving  out  our  larger  cities, 
and  taking  parts  of  the  country  fairly  comparable  with  Scandi- 
navia as  to  population  and  business,  we  have  nothing  on  this  side 
of  the  water  that  approaches  the  telephone  development  of  Nor- 
way and  Sweden.  In  these  countries  and  in  Denmark  there  is 
local  management  of  exchanges.  Switzerland  and  Luxemburg 
have  central  control  with  delegation  of  management,  in  some 
cases,  to  the  local  exchanges. 

In  the  other  countries  of  the  table,  the  rates  are  too  high  for 
full  development  of  the.  service,  and  the  management  is  too 
highly  centralized  —  completely  so  in   France,  Germany,  Bel- 


346 


M I  X1CIPA  L   MOXOPOLIES. 


Cities  show  the  same  contrast. 


TABLE  III.       Ratio  of  Phones  to  Population. 

Population.        Number  of  Telephones. 

1  telephone  to  each  23  persons. 


Stockholm  — 

State  system,  264,000 

Christiania  — 

Municipal  system,  151,000 
Trondhjem1 — 

Municipal  system,  30,000 

Grimstad1 — 

Cooperative  system,  3,000 

Christiansand  :  — 

Cooperative  system,  12,813 
Fredrikstad  l  — 

Local  private,  11.217 

Berne,     State  system  47,000 

Geneva,      "  "  79,000 

Zurich,        "  "  130,000 

Luxemburg  — 

State  System,  18,000 

Copenhagen  — 

Local  private,  315,000 

Aarhus* — 

Local  cooperative,  33,000 

Odense,2  Local  private,  30,208 
Horsens,2      "  "  12,654 

Frederikshavn  2  — 

Local  private,  2,891 

Esbjerg,2  Local  private,  1,529 

Berlin,  State  system,  1,677,000 
Dresden,        "  "  334,000 


30 

38 

25 

56 

40 
40 
30 
50 

30 

70 

60 
60 
63 

14 

7 

67 

100 


gium,  and  Austria,  and  chiefly  so  in  Great  Britain  and  the  United 
States.  There  is  no  competition  in  telephony,  except  in  Stock- 
holm and  in  Finland,  and  to  some  slight  extent  in  Great  Britain 
and  the  United  States.  The  uniform  charge  of  $36  in  Germany 
makes  a  reasonable  rate  in  the  large  cities,  but  is  too  high  for  the 
small  towns  and  country  districts.  Experience  indicates  that 
central  control  of  the  trunk-lines,  local  management  of  exchanges 
under  general  regulations,  and  service  at  or  near  cost  through 
national  trunk-lines  and  co-operative  or  municipal  exchanges,  is 
the  plan  most  likely  to  give  the  people  full  use  of  the  telephone. 
1  Norway.  3  Denmark. 


THE   TELEPHONE. 


347 


TABLE    III.- 

-  Continued. 

Hamburg,  State  System 

,     625,000 

1  telephone  to  each  67  persons 

Brussels,        "           " 

508,000 

:1 

"     200    .  " 

Antwerp,       "           " 

256,000 

1 

"     130       " 

Vienna,          "           " 

1,364,000 

1 

"     170       " 

Paris,              "           " 

2,500,000 

1         " 

"     170       " 

The  Hague  — 

Private  (Bell), 

180,000 

:1         " 

«     470       i, 

Amsterdam  — 

Private  (Bell), 

450,000 

1         " 

"     150       " 

Edinburgh  — 

Private  (National), 

270,000 

1         " 

«     270       " 

London  — 

Private  (National), 

4,430,000 

1         " 

"     630       " 

London  and  Suburbs  — 

Private  (National), 

5,600,000 

1         " 

"     700       " 

New  York  — 

Private  (Bell), 

1,957,000 

1         " 

"     108       " 

Greater  New  York  — 

Private  (Bell), 

3,200,000 

1         " 

"     120       " 

Philadelphia  — 

Private  (Bell), 

1,300,000 

1         " 

«     170       « 

Boston  and  Suburbs  1  — 

Private  (Bell), 

915,000 

1         " 

"       60       " 

St.  Louis,  Private  (Bell) 

,     650,000 

1 

"      127 

Chicago,          " 

1,750,000 

1         " 

"      129 

These  data  for  European  cities  do  not  cover  a 
later  period  than  1895  except  for  England  and 
France,  in  which  case  the  facts  belong  to  1896, 
and  the  American  figures  relate  to  1897. 

In  Norway,  Sweden,  Switzerland,  Denmark,  and 
Luxemburg,  where  telephoning  has  reached  its 
greatest  development,  low  rates  combine  with  local 
management  of  exchanges  to  give  elasticity  and 
adaptability  to  the  service,  and  bring  it  within  the 

1  In  Boston  the  city  and  its  suburbs,  Brookline,  Cambridge, 
Newton,  etc.,  are  served  by  one  telephone  system,  owned  by  Bell 
interests. 


348  MUNICIPAL    MONOPOLIES. 

reach  of  all  the  people.  If  the  people  of  our  towns 
and  villages  and  farming  communities  would  form 
co-operative  exchanges,  or  secure  municipal  ex- 
changes, each  subscriber  paying  an  initial  sum  to 
cover  the  cost  of  constructing  the  lines,  the  better 
settled  portion  of  the  country  could  be  covered 
with  an  efficient  telephone  service  at  very  low  cost. 
Good  lines  can  be  built  in  ordinary  districts  at  an 
average  cost  of  $50  to  $75  per  telephone.  The 
cost  of  operation  in  a  50-mile  radius  need  not 
exceed  $8  or  $10  a  year.  That  is  more  than  the 
cost  in  Trondhjem ;  interest  (4|  per  cent)  and  de- 
preciation (5  per  cent)  amounting  there  to  $4.37, 
and  total  cost  $12.33.  Municipalities  and  co-oper- 
ative societies  in  Norway,  Denmark,  Sweden,  Fin- 
land, France,  and  other  countries  have  achieved 
wonderful  results  with  the  telephone  ;  and  there  is 
no  reason  why  our  people  may  not  do  as  well. 
The  successful  municipalization  of  the  telephone 
in  Trondhjem  and  Christiania  lias  led  the  Town 
Council  of  Rotterdam  to  build  an  exchange,  metal- 
lic throughout,  at  an  annual  rate  of  $31.35  within 
three  miles.  Amsterdam  has  also  resolved  to  estab- 
lish a  municipal  system,  and  Glasgow  is  ready  to 
do  the  same  if  it  can  get  a  license  from  the  gov- 
ernment. 

It  was  reported  in  the  papers  in  the  spring  of 
1897,  that  the  farmers  of  Magnolia  township,  Put- 
nam County,  111.,  have  started  a  telephone  exchange, 


THE  TELEPHONE.  349 

and  have  about  50  phones  and  100  miles  of  wire, 
running  into  several  townships,  and  uniting  the 
owners  with  two  small  and  five  large  towns.  The 
report  says,  "  Good  phones  with  day  battery  can 
now  be  bought  for  $10 ;  and  the  wire  is  quite  cheap 
when  purchased  by  the  quantity,  and  twenty-foot 
poles  for  every  hundred  feet  can  be  had  in  the 
home  forests  of  most  localities.  A  phone  with  a 
mile  of  poles  and  wire  can  be  had  for  about  $  18." 
Many  a  farmer's  daughter  is  glad  to  tend  the 
switchboard  for  $300  a  year,  which  would  be  $ 6 
a  year  for  each  of  the  50  subscribers.1 

The  Electrical  Eyigineer  for  April  7,  1897,  page 
373,  describes  a  Mutual  Telephone  Company  that 
has  been  organized  in  Fillmore  County,  Minn. 
The  entrance  fee  is  $10,  which  is  applied  on  con- 
struction. Each  subscriber  pays  for  his  own  instru- 
ment. The  system  will  be  run  without  cost  to 
subscribers,  except  the  small  assessments  needed, 
now  and  then,  for  repairs.  The  report  says  that 
the  farmers  are  readily  taking  to  the  plan.  Some 
of  our  private  plants  clearly  indicate  what  could 
be  done  with  co-operative  phones  in  this  country. 
For  example,  the  telephone  rate   in   Manhattan, 

1  A  report  in  the  Farmer's  Voice  states  that  the  farmers  of 
Lewanee  County,  Mich.,  have  established  telegraphic  communi- 
cation among  their  homes,  and  speaks  in  glowing  terms  of  the 
many  uses  to  which  these  co-operative  telephone  and  telegraph 
lines  have  been  put  by  the  enlightened  and  energetic  farmers  of 
Michigan  and  Illinois. 


350  MUNICIPAL  MONOPOLIES. 

Kan.,  is  $1  a  month  residence,  and  $2  a  month 
business-place.  Allowing  $75  a  month  to  the 
manager,  who  has  other  interests,  and  only  spends 
part  of  his  time  superintending  the  telephone,  and 
subtracting  7  per  cent  depreciation,  a  clear  profit 
is  obtained  considerably  above  the  10  per  cent  a 
year  that  ambitious  capitalists  seek  to  realize  on 
their  investments. 

The  Department  of  the  Interior  kindly  furnished 
me  with  the  following  facts:  In  1894  the  Depart- 
ment paid  the  Bell  Company  $60  to  $125  each  for 
65  telephones,  the  total  rent  being  $4,283.  The 
Department  employed  a  lady  to  attend  the  main 
exchange  at  $600  a  year,  making  the  total  cost 
$4,883,  or  an  average  of  more  than  $75  per  phone 
per  year.  In  July,  1895,  the  Department  put  in 
a  system  of  its  own,  —  140  telephones  connecting 
widely  scattered  buildings  in  Washington,  with 
four  switchboards,  the  main  exchange  being  in  the 
patent  building,  and  attended  by  the  same  lady 
who  had  charge  of  the  Bell  phones.  In  addition 
to  her  salary  of  $600,  the  Department  pays  an  elec- 
trician $300  a  year  to  keep  the  system  in  repair, 
making  a  total  operating  cost  of  $900  a  year,  or 
$6.43  per  phone.  At  3  per  cent  interest  and  5 
per  cent  depreciation  the  Department  estimates  the 
fixed  charges  at  $3.80  per  phone  year,  which  gives 
a  total  cost  of  $10.25  for  what  used  to  cost  $75  a 
year  under  the  Bell  regime.     The  three  subordi- 


THE  TELEPHONE.  351 

nate  switchboards  are  tended  by  persons  already- 
employed  by  the  government  before  the  telephones 
were  put  in,  and  involve  no  additional  wage  cost. 
The  instruments  cost  about  $20  a  set,  and  are  of 
very  fine  make. 

This  is  a  very  interesting  example  of  what  may 
be  done  with  the  telephone  under  public  owner- 
ship. These  government  phones  and  co-operative 
systems,  together  with  the  municipal  successes  in 
Trondhjem  and  Christiania,  and  the  remarkable 
showing  of  Luxemburg,  Switzerland,  Sweden,  etc., 
with  annual  rates  of  $8  to  $23,  are  worthy  of  the 
careful  consideration  of  all  our  people. 

There  is  no  better  social  cement  or  business  de- 
veloper than  the  telephone ;  and  besides  the  utility, 
think  of  the  happiness  of  conversing  at  will  with 
friends  in  every  part  of  the  country.  A  nation 
that  is  not  well  telephoned  is  losing  one  of  the  best 
and  cheapest  of  the  comforts  and  utilities  within 
its  easy  reach. 

Suppose  the  country  were  netted  with  telephone 
wires,  and  the  rates  were  such  as  to  bring  the  ser- 
vice within  the  reach  of  the  great  body  of  the  peo- 
ple, what  a  mighty  power  the  telephone  would  be 
for  unifying  and  solidifying  the  nation,  uniting 
and  harmonizing  the  interests  and  sentiments  of 
North  and  South,  East  and  West.  If  the  trunk- 
lines  ran  freely  across  the  Rhine,  and  every  town 
in  France  could  communicate,  at  a  reasonable  cost, 


352  MUNICIPAL   MONOPOLIES. 

with  any  part  of  Germany,  it  is  probable  that,  in 
spite  of  the  limitations  of  race  and  language,  the 
telephone  would  be  found  a  potent  means  of  heal- 
ing the  breach  between  those  two  great  peoples, 
which,  more  than  any  other  thing,  except  perhaps 
the  Turkish  and  Egyptian  questions,  threatens  the 
peace  of  Europe.  If  the  new  telelectroscope  can 
be  practically  applied  at  low  cost,  so  that  we  may 
see  the  face  of  a  distant  person  while  we  speak 
with  him  over  the  telephone  wire,  distance  will 
indeed  be  vanquished.  Friends  may  talk  with 
each  other  face  to  face  in  spite  of  intervening 
mountains  and  seas.  Niagara  may  be  seen  and  its 
thunder  heard  without  leaving  our  homes.  The 
world  will  be  at  our  feet. 

What  method  should  be  adopted  to  secure  the 
best  results  from  the  telephone  service  is  a  matter 
of  dispute.  Some  experts  of  high  authority  be- 
lieve in  decentralization.  They  think  the  trunk- 
lines  should  be  in  the  hands  of  the  state  or  of  a 
single  carefully  regulated  company,  but  would 
leave  the  local  exchanges  to  local  enterprise,  co- 
operative, municipal,  or  private.  Others,  among 
whom  are  some  who  have  done  eminent  service  in 
extending  the  Bell  system,  say  that  decentraliza- 
tion is  likely  to  prevent  the  fullest  use  of  long-dis- 
tance communication,  methods  and  instruments 
being  adopted  in  some  localities  that  are  not  fitted 
for  thousand-mile  conversations,  and  that  it  is  best 


THE   TELEPHONE.  353 

to  have  a  system  practically  under  one  general 
management,  so  that  local  methods  and  instru- 
ments may  be  adapted  to  long-distance  work. 
Those  who  favor  decentralization  reply  that  local 
adaptation  to  long-distance  work  may  be  secured 
by  state  regulation ;  that  free  play  should  be  given 
to  local  co-operative,  municipal,  and  individual  en- 
terprise, leaving  the  choice  among  these  methods 
to  the  electors  of  the  municipalities  ;  that  a  central- 
ized system,  if  owned  by  the  state,  does  not  tend 
to  develop  local  energy  and  patriotism,  and  is  un- 
necessary in  respect  to  local  exchanges,  since  local 
effort  is  able  to  do  the  work  well ;  and  that  a  cen- 
tralized system  privately  owned  tends  to  limit  the 
service  to  the  more  thickly  settled  areas,  to  make 
rates  so  high  that  a  full  use  of  the  system  is  not 
secured  even  in  the  favored  areas,  and  to  throw 
great  power  and  wealth  into  the  hands  of  a  small 
body  of  capitalists.  It  is  to  be  hoped  that  the 
tru,th  may  so  clearly  appear  before  the  latest  devel- 
opment of  the  means  of  communication  comes  into 
general  use,  that  when  telelectroscope  systems 
come  to  be  built,  the  best  plan  may  be  adopted 
from  the  start.  It  seems  clear  that  the  prime  use 
of  these  great  inventions  should  be  as  civilizing 
agencies,  and  not  as  money-making  instrumentali- 
ties. And  it  is  also  clear,  that,  while  the  United 
States  is  far  ahead  of  most  other  countries  in  re- 
spect to   its   telephone  service,  there   are  several 


354  MUNICIPAL   MONOPOLIES. 

countries  of  Europe  that  can  teach  us  very  valua- 
ble lessons. 

If  the  trunk-lines  were  in  the  hands  of  the  post- 
office,  and  the  exchanges  were  managed  by  the 
municipalities,  or  co-operative  societies  or  local 
agencies  of  the  post-office,  on  moderate  salaries, 
with  a  small  commission  on  subscriptions,  the  whole 
service  unified  by  a  solid  federation  of  all  the  ex- 
changes under  elastic  postal  regulations,  and  thor- 
oughly co-ordinated  with  the  mails  and  a  national 
postal  telegraph,  —  in  other  words,  if  a  system 
were  adopted  here  similar  to  that  which  has  proved 
so  advantageous  across  the  sea,  —  we  believe  the 
United  States  would  soon  be  telephoned  as  well  as 
any  country  in  the  world. 

Note  by  Editor. 

The  operating  expenses  and  the  receipts  of  the  French 
telephone  system  for  1890-1896  inclusive  were  as  fol- 
lows :  — 


Date. 

Expenses. 
(Francs.) 

Receipts. 
(Francs.) 

Excess 
of  Expense. 

(Francs.) 

Excess    * 
of  Receipts. 
(Francs.) 

1890 

3,849,069 

5,372,938 

1,523,869 

1891 

5,221,894 

5,404,694 

182,800 

1892 

6,688,489 

6,658,795 

29,694 

1893 

10,953,120 

7,610,809 

3,342,311 

1894 

9,441,739 

8,529,941 

911,798 

1895 

10,853,058 

9,561,348 

1,291,710 

1896        10,876,652        10,935,967  59,315 

With  the  exception  of  1893,  -when  some  exceptional 
conditions  may  have  existed,  the  receipts  nearly  equaled 
the  operating  expenses.     In  Belgium  in  1896  the  receipts 


THE   TELEPHONE.  355 

from  telephones  and  telegrams  were  6,580,763  francs,  of 
which  the  telephone  receipts  were  2,564,578  francs.  There 
is  no  separation,  in  the  reports  at  hand,  of  the  expenses  of 
the  telephone  and  the  telegraph ;  but  the  total  operating 
expenses  were  5,872,298  francs.  The  excess  of  receipts, 
or  708,465  francs,  was  balanced  in  the  official  report  at 
hand  by  the  estimate  of  the  value  of  the  services,  —  919,538 
francs  —  rendered  for  the  telegraph  and  telephone  systems 
by  the  public  railroads.  However,  there  seem  to  have  been 
many  gratuitous  services  performed  for  the  government  and 
the  railroads  by  the  telephone  and  telegraph  systems.  The 
total  expense  of  construction  of  these  systems  is  reported 
as  13,215,000  francs. 

According  to  the  United  States  Consular  Report  for 
August,  1897,  the  receipts  of  the  Swiss  telephones  were 
$600,997  in  1894,  $636,199  in  1895,  and  $836,373  in  1896, 
while  the  operating  expenses  for  these  three  years  respec- 
tively were  $542,213,  $567,207,  and  $839,257.  These,  which 
are  the  only  late  European  reports  at  hand,  taken  in  con- 
nection with  the  exhaustive  discussion  of  rates  in  Professor 
Parsons's  chapter,  show  the  tendency  of  public  ownership  to 
extend  the  service  by  reducing  rates,  rather  than  to  attempt 
to  earn  interest  and  depreciation  by  higher  charges.  The 
social  benefits  gained  by  extensive  increase  of  the  tele- 
phone, as  in  the  case  of  the  telegraph,  or  of  public  water- 
works in  a  city,  doubtless  justify  this  policy. 

A  report  from  the  Select  Committee  on  Telephones 
of  the  British  House  of  Commons,  ordered  to  be  printed 
Aug.  9,  1898,  declares  that  the  present  telephone  system  of 
that  country  "  is  not  likely  to  become  of  general  benefit 
...  so  long  as  the  present  practical  monopoly  in  the 
hands  of  a  private  company  shall  continue."  The  report 
specially  criticises  the  failure'  of  the  private  company  to 
furnish  abundant  facilities  for  the  mass  of  the  people  to 


356  MUNICIPAL  MONOPOLIES. 

use  the  telephone  for  single  messages,  on  the  payment 
of  a  small  fee  for  each  service.  "  Within  the  London  area, 
containing  a  population  of  over  6,000,000  persons,  there  are 
only  237  call-offices  open  to  non-subscribers  for  the  trans- 
mission of  messages.  In  Stockholm  there  are  700  for  a 
population  of  only  one-quarter  of  a  million." 

The  Continental  custom  of  delivering  telephone  mes- 
sages by  messenger  service,  as  described  above,  to  those 
having  no  telephones,  is  also  commended. 

The  report  of  the  Committee,  which  appears  to  be  unani- 
mous, contains  the  following  conclusion  : 

"  On  reviewing  the  whole  of  the  evidence,  your  commit- 
tee is  strongly  of  the  opinion  that  general,  immediate,  and 
effective  competition  by  either  the  Post-Office  or  the  local 
authority  is  necessary,  and  consider  that  a  really  efficient 
Post-Office  service  affords  the  best  means  for  securing  such 
competition.  We  further  consider  that  when,  in  an  exist- 
ing area  in  which  there  is  an  exchange,  the  local  authority 
demands  a  competing  service,  the  Post-Office  ought  either 
to  start  an  efficient  telephone  system  itself,  or  grant  a 
license  to  the  local  authority  to  do  so." 

Before  this  Committee  Mr.  A.  P.  Bennett,  a  telephone 
engineer  of  more  than  seventeen  years'  experience  and  chief 
engineer  of  an  English  telephone  company,  testified  :  — 

"  The  capital  outlay  for  (establishing  a  telephone  ex- 
change in)  a  small  or  medium-sized  town,  where  one  switch- 
room  suffices,  is  from  £12  to  £14  ($60  to  $70)  per  subscriber ; 
but  in  larger  towns,  where  several  switchrooms  (sub-ex- 
changes) connected  by  junction  (trunk)  lines  are  required  ; 
the  cost,  in  the  absence  of  special  obstacles,  should  range 
from  £16  to  £24  ($80  to  $120)  per  line,  excepting  in  Lon- 
don, where  I  will  estimate  the  cost  would  be  £36  ($180)  per 
line." 

A  committee  of  twenty-five  citizens  in  Mansfield,  Ohio, 


THE   TELEPHONE.  357 

organizers  of  the  Mansfield  Telephone  Company,  published, 
in  the  summer  of  1898,  letters  from  16  independent  com- 
panies, giving  equally  astonishing  figures.  For  example: 
the  company  at  Elyria,  Ohio,  reports  that  its  complete  plant 
cost  $40  per  phone,  and  with  monthly  rentals  of  $2  for 
business-houses  and  SI  for  residences,  it  is  making  12 
per  cent  on  a  capital  of  $20,000.  The  company  at  Elk- 
hart, Ind.,  reports  a  cost  of  $60  per  subscriber,  and  oper- 
ating expenses  of  $3,500  for  360  phones,  leaving  $4,000 
for  dividends  and  surplus,  with  charges  of  $1.50  and  $2. 
This  means  16  per  cent  for  profit  and  depreciation. 

The  Twin  City  Telephone  Company  of  Benton  Harbor, 
Mich.,  reports  a  probable  profit  of  12  per  cent  the  first 
year,  with  432  telephones  and  rates  of  $25  and  $16.  The 
company  at  Plymouth,  Ind.,  reports  earnings  of  30  per  cent 
on  a  capital  of  $8,000  paid  in,  with  165  phones,  and  with 
rates  of  $24  and  $18. 

A  prominent  business-man,  who  has  constructed  a  fine 
telephone  plant  of  500  phones,  on  which  profits  of  over  10 
per  cent  are  being  earned,  although  the  rates  are  only  25 
cents  a  week  for  houses  and  50  cents  a  week  for  stores  and 
business-offices,  writes  as  follows :  "  Under  ordinary  condi- 
tions, a  plant  of  less  than  1,000  phones,  with  common  return 
wire,  overhead  wires,  about  a  mile  of  cable,  and  clay  soil 
—  no  rock — will  cost  about  $60  to  $80  per  phone.  The 
actual  cost  of  a  phone  ready  for  position  at  wholesale  price 
for  the  material,  ready  to  be  assembled  on  the  ground, 
is  $5.10.  Dealers  charge  twice  that.  The  cost  of  mainte- 
nance is  about  $10  per  phone  per  annum,  not  including  any 
sinking-fund  for  repairs  or  depreciation  of  plant,  or  officers' 
salaries,  save  of  the  laborers  on  the  ground,  and  a  treasurer 
or  collector,  superintendent,  etc." 

A  prosperous  Western  company  is  making  over  12  per 
cent  profit  on  rates  of  $1  a  month  for  houses  and  $2  a 


358  MUNICIPAL   MONOPOLIES. 

month  for  business-places.  It  reports  that  its  220  phones 
cost  $10,000,  or  $45  per  phone,  and  that  the  operating  ex- 
penses average  only  $9  for  each  of  170  houses,  and  50 
business  phones. 

The  cost  is  larger  in  large  places ;  but  the  Detroit  tele- 
phone company  is  serving  6,000  subscribers  in  Detroit, 
Mich.,  for  $45  a  year  for  business-houses  and  $30  a  year  for 
residences,  and  for  $5  less  in  each  case  on  a  three  years' 
contract,  besides  furnishing  many  free  telephones.  Even 
in  1891  Toronto  secured  a  rate  from  the  Bell  Telephone 
Company  of  $45  for  business-houses  and  $25  for  residences, 
aside  from  a  payment  to  the  city  of  5  per  cent  of  the  gross 
receipts  on  a  five-year  contract. 

Richmond,  Ya.,  reports  1,500  telephones,  with  a  rapid 
growth  and  great  prosperity.  The  charges  in  that  city  of 
100,000  people  are  $36  and  $24. 

A  few  co-operative  telephones,  like  those  in  Norway  and 
Sweden,  are  being  established  in  this  country.  In  Fort 
Scott,  Kan.,  120  stockholders  are  operating  such  a  system. 
In  August,  1894,  the  Mutual  Company  was  organized. 
Each  stockholder  was  to  own  one  share  of  stock  for  each 
telephone  used,  the  monthly  rent  to  begin  at  $1,  and  to 
be  increased  or  diminished  as  the  interests  of  the  com- 
pany required.  In  the  spring  of  1895  the  plant  began 
operations  with  114  telephones.  It  was  then  found  neces- 
sary to  make  a  rate  for  non-stockholders ;  as  the  railroads 
and  express  companies  would  not  take  the  stock,  but  were 
willing  to  pay  a  good  rental.  In  September,  1898,  there 
were  120  stockholders  paying  $1  a  month  each,  60  sub- 
scribers paying  $1.50  per  month  for  residences,  47  subscri- 
bers paying  $2.50  per  month  for  business-places,  and  5  free 
telephones.  The  operating  expenses  are  about  $12  per  year 
per  phone,  and  the  cost  of  construction  about  $50. 

Mr.  J.  A.  Gaynor,  President  of  the  Wood  County  Tele- 


THE  TELEPHONE.  359 

phone  Company  of  Grand  Rapids,  AVis.,  a  most  interesting 
co-operative  enterprise,  thus  writes  :  — 

"  In  the  fall  of  1894  the  Bell  Company  had  about  70 
phones  in  its  exchange  in  this  place,  at  a  monthly  rental  of 
$4.00  for  business  and  $3.00  for  residences.  We  asked 
them  at  that  time  for  a  reduction  of  rates,  which  they 
refused.  In  the  spring  following  we  organized  a  home 
company  with  a  capital  stock  of  $5,000,  divided  into  100 
shares  of  $50  each. 

"  Under  our  charter  we  sell  stock  only  to  such  as  rent  a 
phone  from  the  company,  selling  one,  and  only  one,  share 
to  the  renter  of  one  telephone ;  and  in  case  any  stockholder 
ceases  to  rent  a  telephone  from  our  company,  we  reserve 
the  right  or  option  to  purchase  from  him  his  stock  at  par. 

"  The  above  is  the  plan  of  our  company.  We  resolved 
not  to  construct  until  three-fourths  of  the  patrons  of  the 
Bell  Company  had  subscribed  to  take  their  local  telephone 
service  from  us  alone,  nor  until  one-half  of  the  stock  was 
subscribed  for.  These  two  things  were  accomplished  in 
February,  1896.  When  spring  opened  we  began  the  work 
of  construction,  and  had  the  plant  ready  for  business  on 
July  1,  1896,  with  83  telephones  in  the  exchange. 

"  One  month  after  we  started,  the  Bell  Company  did  not 
have  a  local  paying  telephone  in  its  exchange,  and  only 
about  20  of  the  telephones  were  suffered  to  remain  in  free. 
About  a  year  later,  in  the  fall  and  summer  of  1897,  the 
Bell  people  began  to  solicit  the  privilege  of  putting  in  free 
phones  for  any  one  who  would  accept  them.  They  got  in 
about  70,  when  our  company  began  to  realize  that  they 
meant  mischief ;  for  we  saw  that  as  soon  as  they  could  get 
their  phones  into  most  of  the  private  residences,  and  had 
more  phones  in  their  plant  than  the  home  company  had, 
our  business-men  might  find  that  phone  more  valuable  to 
them  than  ours,  and  that  the  move  meant  the  death  of  the 


360  MUNICIPAL  MONOPOLIES. 

home  company.  As  soon  as  the  people  realized  this,  they 
almost  unanimously  ordered  out  the  free  phone.  Even 
those  who  could  not  afford  the  home  phone  were  as  loyal 
as  the  stockholders  in  the  home  company. 

"  We  now  have  peace,  and  rest  secure  in  the  local  patriot- 
ism of  our  people.  We  have  now  in  the  plant  186  phones, 
put  in  at  a  cost  of  $9,000. 

"  We  increased  the  stock  this  year  from  $5,000  to  $10,- 
000.     We  have  sold  100  shares. 

We  charge  for  business  rentals $2.50 

And  for  residences 1.50 

"  We  declare  a  monthly  dividend  of  l£  per  cent  on  stock, 
which  is  credited  up  to  the  stockholder  on  his  monthly 
rental.  So  the  stockholders  pay  in  fact  only  $1.75  for  busi- 
ness and  50  cents  for  residences. 

Of  the  total  cost  of  the  plant $9,000 

We  have  received  from  sale  of  stock      .     .     .    $5,000 

And  our  present  indebtedness  is $1,000 

The  surplus  earnings  in  28  months  are   .     .     .     $3,000 

all  of  which  has  been  applied  to  extend  the  plant. 

"  At  the  close  of  this  year  we  will  probably  reduce  busi- 
ness-rates to  $1.50,  and  residence  rates  to  $1.00  ;  and  reduce 
the  monthly  dividend  to  stockholders  to  1  per  cent,  or  50 
cents  per  month. 

"  This  will  give  stockholders  their  telephone  service  at 
50  cents  for  residence  and  $1.00  for  business.  Our  plan  is 
very  satisfactory  to  our  people.  They  have  gained  through 
it  several  substantial  advantages.  Their  service  has  cost 
them  less  than  they  would  have  to  pay  to  a  company  whose 
chief  aim  is  profit.  They  have  better  service.  The  local 
service  is  extended  to  points  that  benefit  our  city  as  a 
whole,  but  extensions  to  which  in  the  opinion  of  a  private 


THE   TELEPHONE.  361 

company  would  not  be  justified  by  earnings.  We  give  such 
service  as  the  majority  want.  In  case  of  serious  accident 
by  storm,  our  people  are  more  patient  with  the  home  com- 
pany than  they  would  be  with  a  private  company. 

"  The  greatest  point  gained  in  the  struggle  for  indepen- 
dence was  the  building  up  of  a  local  patriotism,  an  esprit 
de  corps,  that  has  united  our  people  to  such  a  degree  that 
we  can  protect  ourselves  against  any  monopoly  that  op- 
presses us.  It  was  local  patriotism  that  saved  us  when  the 
Bell  Company  offered  free  phones  to  our  people.  I  would 
not  recommend  our  plan  to  a  town  lacking  in  local  patriot- 
ism. When  it  is  '  each  hog  for  himself,'  our  plan  would 
be  liable  to  fail. 

"Wausau  and  Merril  have  companies  modeled  on  our 
plan.  They  are  a  decided  success.  At  Marshfield  a  ma- 
jority of  the  stockholders  are  offered  a  large  premium  for 
their  stock,  with  a  special  favor  on  services  hereafter ;  and 
they  are  disposed  to  sell  out  to  the  Bell  Company  on  the 
terms  offered.  After  offering  the  stock  to  telephone 
renters  as  we  did,  only  sixteen  shares  were  taken,  and  the 
original  incorporators  took  the  balance  of  the  100  shares. 
If  the  plan  fails  there,  it  will  be  for  the  lack  of  distribut- 
ing the  stock  as  we  did.  That  city  stands  notoriously  low 
in  local  patriotism." 


V. 


MUNICIPAL    FRANCHISES 
IN    NEW    YORK. 


MUNICIPAL    FRANCHISES 
IN    NEW    YORK. 

By  MAX  WEST,  Ph.D. 

U.S.  Department  of  Agriculture,  Washington,  D.C. 


I.     THE   FERKIES    AND   DOCKS. 

The  most  ancient  of  New  York's  municipal 
franchises  are  those  pertaining  to  the  ferries  and 
docks,  which  yielded  revenue  to  the  city  nearly 
two  and  a  half  centuries  ago.  Under  the  Dutch 
regime  the  rent  of  the  ferry  to  Long  Island  seems 
to  have  been  a  perquisite  of  the  governors,  al- 
though the  magistrates  of  New  Amsterdam  li- 
censed the  ferrymen.  The  latter  were  brought 
under  strict  governmental  control  in  1654,  when 
the  governor  and  council  fixed  the  tolls  and  the 
hours  during  which  boats  were  to  be  kept  in  wait- 
ing. The  burgomasters  more  than  once  applied 
to  Governor  Stuyvesant  for  the  ferry  rent  as  a 
source  of  municipal  revenue,  but  without  success. 
Under  English  rule,  however,  the  city  soon  came 
into  possession  of  this  income.  In  1674  the  ferry 
365 


366  MUNICIPAL  MONOPOLIES. 

was  leased  at  an  annual  rental  of  £103  (-$257.50), 
and  the  next  year  at  £259  10s.  In  1691  it  was 
farmed  out  at  public  outcry  at  £148  a  year,  and 
in  1695  it  was  again  leased  at  auction  at  £147  a 
year  for  seven  years.  The  ferry  was  at  this  period 
the  chief  source  of  municipal  revenue,  and  taxes 
were  levied  only  on  extraordinary  occasions.1 

The  rent  of  the  ferry  gradually  increased  with 
the  growth  of  population.  In  1700  it  was  fixed  at 
£130  a  year,  and  in  1707  at  £180 ;'  auction  sales 
raised  it  to  £211  in  1712,  and  to  £240  five  years 
later;  while  it  had  risen  by  1766  to  £660,  but 
fell  in  1771  to  £550.  These  ferry  leases  included 
something  more  than  the  mere  privilege  of  run- 
ning certain  row-boats  and  scows  between  Man- 
hattan and  Long  Islands;  for  the  city  of  New 
York  had  built  the  ferry-houses  on  both  sides,  and 
about  the  middle  of  last  century  the  ferry  lease 
carried  with  it  "  the  dwelling-house,  stables,  erect- 
ments,  buildings,  pier,  land  and  well  "  in  Brooklyn. 

In  1774  the  city  authorities  determined  to  have 

1  The  right  of  the  city  to  the  ferry  monopoly  was  confirmed 
hy  the  Dongan  charter  of  1686,  the  Combury  charter  of  1708,  the 
Montgomerie  charter  of  1730,  and  subsequent  charters  and  Acts  of 
the  State  Legislature.  The  Combury  charter,  in  order  to  protect 
the  authorized  ferry  from  the  competition  of  private  individuals, 
also  granted  to  New  York  City  the  unappropriated  land  between 
high  and  low  water  on  the  Brooklyn  side,  from  Wallabout  to  Red 
Hook,  with  power  to  establish  and  maintain  one  or  more  ferries; 
enough  real  estate  for  a  landing  on  Long  Island  had  been  pur- 
chased by  the  city  several  years  before. 


MUNICIPAL  FRANCHISES  IN  NEW    YORK.      367 

three  separate  ferries  to  Brooklyn,  arid  three  leases 
were  executed  at  an  aggregate  rental  of  £670 
($1,675).  Two  years  later  all  three  ferries  were 
let  for  £450  to  one  lessee,  who  agreed  to  provide 
a  ferry-house  on  the  New  York  side.  By  1805 
the  rent  had  risen  to  $4,325  for  two  ferries,  while 
in  1811  the  Old  Ferry  alone  brought  $3,450  a 
year.  It  is  interesting  to  note  that  as  early  as 
1805  it  was  stipulated  that  the  new  lessee  should 
purchase  the  boats  at  a  valuation  fixed  by  arbitra- 
tors ;  this  is  usually  a  condition  of  the  ferry  leases 
to-day. 

The  use  of  steam  ferry-boats  dates  from  1811, 
when  leases  were  granted  to  John  Stevens  for  a 
steam-ferry  to  Hoboken,  and  to  the  Jersey  Asso- 
ciation, in  which  Robert  Fulton  was  interested, 
for  one  to  Paulus  Hook.  Three  years  later  a 
25-year  lease  was  granted  Robert  Fulton  and 
William  Cutting  for  a  steam-ferry  between  New 
York  and  Brooklyn,  at  an  annual  rental  of  $4,000 
for  the  first  eighteen  years  and  $4,500  thereafter. 
The  city  agreed  to  build  and  repair  the  wharves, 
and  apply  to  the  Legislature  for  an  increase  in  the 
ferry  tolls.  Notwithstanding  a  protest  from  Brook- 
lyn, the  increase  of  rates  was  authorized,  but  an 
annual  commutation  of  $10  was  provided  for.  In 
1836  the  successors  of  the  original  lessees  sold  the 
lease,  which  had  only  three  years  more  to  run,  to- 
gether with  the  boats  and  fixtures,  for  $100,000. 


368  MUNICIPAL  MONOPOLIES. 

Out  of  this  transaction  arose  the  New  York  and 
Brooklyn  Ferry  Company  and  its  successor  the 
Union  Ferry  Company,  which  for  many  years 
played  an  important  part  in  the  history  of  Brook- 
lyn. The  dividends  of  both  these  companies  were 
limited,  at  first  to  7  and  afterward  to  10  per  cent; 
and  they  reduced  the  fare  for  foot-passengers  on 
their  various  ferries  from  four  to  three,  and  finally 
two  cents,  with  a  commutation  rate  of  seventeen 
tickets  for  a  quarter.  For  a  short  time  in  the 
early  50's  the  fare  was  only  one  cent.  In  1871, 
in  consideration  of  a  new  lease  at  a  nominal  rental, 
the  Union  Ferry  Company  reintroduced  a  one-cent 
fare  morning  and  evening ;  but  the  receipts,  in- 
stead of  diminishing  as  they  were  expected  to  do, 
steadily  increased.  The  tolls  on  certain  other  fer- 
ries were  afterward  reduced  to  two  and  three  cents 
by  the  Legislature.1 

In  1853  the  Legislature  required  the  ferry  leases 
to  be  disposed  of  at  public  auction  for  periods  not 
exceeding  ten  years ;  and  since  that  time  the  leases 
have  been  sold  by  the  City  Comptroller  under  the 
direction  of  the  Commissioners  of  the  Sinking 
Fund,  a  minimum  or  upset  price  being  fixed  for 

1  Many  interesting  details  respecting  the  ferries  are  given  by 
Pierrepont,  "Historical  Sketch  of  the  Fulton  Ferry  and  its  Asso- 
ciated Ferries;  "  Stiles,  "  History  of  the  City  of  Brooklyn ;  "  Mrs. 
Lamb,  "History  of  the  City  of  New  York;  "  Hoffman,  "  Estate 
and  Rights  of  the  Corporation  of  the  City  of  New  York;  "  Valen- 
tine, "Ferry  Leases  and  Railroad  Grants,"  etc. 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     369 

each  sale.  The  new  charter  transfers  the  general 
control  of  the  ferries,  including  the  duty  of  sell- 
ing the  franchises,  to  the  Department  of  Docks, 
henceforth  to  be  known  as  the  Department  of 
Docks  and  Ferries ;  but  the  terms  of  each  lease 
must  still  be  approved  by  the  Commissioners  of 
the  Sinking  Fund,  and  the  proceeds  are  to  be 
applied  to  that  fund  as  in  the  past.  The  sales 
may  be  either  at  auction  or  by  sealed  bids ;  the 
franchise  period  is  still  limited  to  ten  years. 

By  selling  the  ferry  franchises  in  the  manner 
indicated,  they  have  been  made  to  produce  a  very 
respectable  revenue.  The  Union  Ferry  Company 
now  pays  7f  per  cent  of  the  gross  receipts  of  its 
four  ferries  between  Manhattan  and  Brooklyn, 
amounting  in  1897  to  $65,521.  In  many  other 
cases  the  rent  is  a  stipulated  sum  per  annum  ;  in 
some  it  is  a  stipulated  amount  and  a  percentage. 
The  Bay  Ridge  Ferry  was  leased  for  $15,000  a  year 
and  21^  per  cent  of  the  receipts,  but  the  matter  is 
now  in  litigation.  The  total  receipts  from  some 
30  ferries  in  1896,  as  shown  by  the  Comptroller's 
books,  were  $316,598  ;  but  rather  more  than  $15,- 
000  of  this  amount  was  wharf  rent,  so  that  the 
ferry  franchises  alone  yielded  about  $330,000. 
An  increase  of  wharf  rent  brought  the  total  for 
1897  up  to  $366,539.  These  Comptroller's  figures, 
however,  include  only  a  small  part  of  the  wharf 
rent  paid  by   ferry  companies,  the    greater   part 


370  MUNICIPAL  MONOPOLIES. 

having  been  paid  to  the  Department  of  Docks, 
even  under  the  old  charter.  The  ferry  companies 
also  pay  State  taxes  on  their  capital  and  on  their 
earnings. 

The  city  wharf,  first  built  in  1658,  was  an 
important  source  of  early  municipal  revenue.1 
The  charters  of  Dongan  and  his  successors  gave 
to  the  city  the  land  between  high  and  low  water 
all  around  Manhattan  Island ;  but  much  of  this  was 
alienated,  and  it  was  only  in  1870  that  the  city 
began  to  buy  it  back  at  high  prices,  and  improve  it 
on  a  large  scale.  For  twenty-five  years  the  receipts 
of  the  Dock  Department  just  about  balanced  the 
expenditures,  but  the  latter  were  chiefly  for  the 
acquisition  of  property  and  the  building  of  wharves. 
In  1895-96  the  total  revenue  of  the  department 
from  leased  wharves  and  wharfage  was  $2,021,698, 
and  the  expenditure  only  $760,050  ;  in  1896-97 
the  acquisition  of  an  unusually  large  amount  of 
new  property  brought  the  total  expenditures  up  to 
$1,739,762,  which  was  still  some  $327,000  less  than 
the  receipts.  In  the  future  a  handsome  profit 
may  be  expected  from  this  source.  Comptroller 
Fitch,  in  the  last  year  of  his  incumbency,  expressed 
the  opinion  that  some  of  the  wharf  rentals  were 
too  low,  and  recommended  that  wharf  privileges 

1  G.  A.  Black,  "Municipal  Ownership  of  Land  on  Manhattan 
Island."  p.  20  (Columbia  College  Studies,  1:  184) ;  E.  D.  Durand, 
"The  City  Chest  of  New  Amsterdam,"  Half  Moon  Series,  p.  229. 


MUNICIPAL  FRANCHISES  IN  NEW   YORE.     371 

be  disposed  of  only  at  auction,1  the  mode  of  dispo- 
sition already  in  use  in  a  large  proportion  of  eases. 
New  York's  policy  of  public  ownership  of  wharves 
has  been  severely  criticised,  chiefly  on  the  ground 
that  it  has  led  to  the  separation  of  the  warehouses 
from  the  wharves,  and  thus  necessitated  much  extra 
handling  of  freight,  to  the  detriment  of  New  York 
as  a  commercial  port.2  It  is  now  proposed  to  over- 
come this  objection  by  a  system  of  railroad  tracks 
along  the  marginal  street,  designed  to  facilitate 
freight  traffic  to  the  utmost,  and  spanned  by  trans- 
verse bridges  to  accommodate  the  passenger  business 
of  the  ferries.3  One  important  advantage  of  muni- 
cipal ownership  has  recently  been  demonstrated  by 
the  construction  of  a  number  of  free  "  recreation 
piers  "  adjoining  crowded  sections  of  the  city.  Free 
floating-baths  have  long  been  maintained  on  the 
water  front  by  the  Department  of  Public  Works. 

H.      THE  SURFACE  K AH/WAYS. 

"  The  New  York  and  Harlaem  Rail-road  Com- 
pany" was  created  by  the  Legislature  in  April,  1831, 

i  City  Record,  25:  2406  (June  23,  1897). 

2  See  W"m.  N.  Black,  "  Storage  and  Transportation  in  the  Port 
of  New  York,"  and  "The  Crippled  Commerce  of  New  York," 
with  an  introduction  by  Erastus  Wiman.  The  Governor  of  the 
State  has  recently  appointed  a  commission  to  inquire  into  the 
causes  of  the  relative  decline  in  the  export  trade  of  New  York. 

3  Reports  of  Board  of  Consulting  Engineers,  Nov.  11,  1895,  to 
Dec.  15,  1897. 


372  MUNICIPAL  MONOPOLIES. 

with  power  to  construct  a  railway  north  of  Twenty- 
third  Street,  upon  the  approval  of  the  Common 
Council,  and  to  operate  it  by  steam,  animals,  or 
any  other  power,  for  a  period  of  thirty  years.  This 
was  the  first  grant  of  the  power  to  lay  railroad 
tracks  in  New  York  City.  The  plans  were  duly 
approved  by  the  Council,  which  finally  gave  its 
consent  to  the  proposed  innovation  in  December, 
locating  the  road  in  Fourth  Avenue,  and  expressly 
reserving  the  right  to  regulate  the  speed  and  the 
kind  of  power  to  be  used  in  propelling  the  car- 
riages, and  the  right  to  order  the  tracks  removed 
if  they  should  prove  an  obstruction.  The  follow- 
ing May  the  Council  gave  its  consent  to  an  exten- 
sion of  the  road  south  from  Twenty-third  Street 
into  the  heart  of  the  city,  subject  to  the  same  condi- 
tions as  those  in  the  original  franchise.  The  rails 
were  to  be  laid  in  portions  of  the.  streets  to  be 
designated  by  the  Street  Commissioner,  and  the 
company  was  required  to  lay  and  keep  in  repair  a 
strip  of  pavement  twenty  feet  wide.  No  other 
compensation  was  exacted.  In  1859  the  franchise 
was  renewed  for  a  period  of  thirty  years.  An  Act 
of  1874  empowered  railroad  companies  to  renew 
their  own  franchises  by  simply  filing  certificates 
extending  their  corporate  existence ;  and  the  New 
York  and  Harlem  Company  took  advantage  of 
this  Act  to  extend  its  privileges  to  the  year  2389. 
The  period  of  active  street  railway  construction 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     373 

was  inaugurated  with  the  granting  of  the  Sixth 
and  Eighth  Avenue  franchises  by  the  Common 
Council  in  1851.  The  fare  was  limited  to  five 
cents  for  the  entire  length  of  the  roads  from  lower 
New  York  to  Harlem;  and  each  car  was  required 
to  be  licensed,  the  amount  of  the  fee  being  left  to 
the  future  determination  of  the  Council.  The 
companies  were  required  to  report  their  receipts 
monthly  to  the  City  Comptroller,  and  to  file  with 
him  a  statement  under  oath  of  the  cost  of  each 
mile  of  road  completed.  The  city  reserved  not 
only  the  right  to  have  the  tracks  taken  up  when- 
ever it  saw  fit,  but  also  the  right  to  purchase  the 
roads  at  any  time  on  payment  of  the  cost  of  con- 
struction plus  10  per  cent,  —  a  provision  found  only 
in  these  two  grants. 

The  Second  and  Third  Avenue  companies  ob- 
tained their  franchises  at  the  end -of  1852,  and  the 
latter  was  required  to  pay  the  annual  license  fee 
for  each  car  then  allowed  by  law.  The  Council  had 
not  yet  established  a  special  license  fee  for  street- 
cars, but  relied  upon  a  general  ordinance  imposing 
license  fees  upon  stages  and  stage-coaches ;  and 
the  courts  have  held  this  applicable  to  the  more 
modern  vehicles.1  The  amount  of  the  fee  was  $20 
a  year  for  two-horse  vehicles,  with  half  rates  for 
those  having  wide  tires.  When  the  Ninth  Avenue 
line  was  chartered  by  resolution  of  the  Council  in 

i  City  of  N.Y.  vs.  Third  Avenue  R.  R.  Co.,  117  N.Y.,  404. 


374  MUNICIPAL   MONOPOLIES. 

1853,  it  was  explicitly  required  to  pay  the  annual 
license  fee  of  $20  a  car.  A  general  ordinance 
passed  at  the  end  of  1858  fixed  the  license  fee  at 
$50  except  for  small  one-horse  cars,  which  were  to 
pay  $25  ;  but  the  courts  held  that  where  an  agree- 
ment had  been  entered  into  without  mention  of  a 
license  fee,  or  where  the  amount  of  the  fee  had 
already  been  fixed,  it  could  not  thus  be  imposed 
or  increased.1  An  ordinance  of  1875  exempted 
from  license  fees  the  companies  which  paid  3  per 
cent  of  their  gross  receipts,  or  whose  franchises 
had  been  sold  at  public  sale  to  the  highest  bidder. 
For  fifteen  years,  beginning  in  1860,  street-rail- 
way franchises  were  granted  by  the  State  Legisla- 
ture exclusively,  usually  without  provision  for  any 
compensation,  though  in  some  cases  a  percentage 
of  the  gross  or  net  receipts  was  exacted,  and  one 
company  was  required  to  pay  instead  a  fixed  sum  of 
$1,000  a  year.2  Two  or  three  franchises  granted  in 
the  early  seventies  provided  that  the  compensation 
to  the  city  should  be  determined  by  commissioners 
appointed  by  the  Supreme  Court,  in  the  same 
manner  as  compensation  to  private  owners  under 
the  General  Railroad  Act.  The  compensation  for 
the  New  York  and  Harlem  Company's  extensions 


i  City  of  N.  Y.  vs.  Second  Avenue  R.  R.  Co.,  32  N.Y.,  261; 
City  of  N.Y.  vs.  Third  Avenue  R.  R.  Co.,  33  N.Y.,  42. 

2  The  details  for  this  period  are  given  in  Durand's  "  Finances 
of  New  York  City,"  p.  234. 


MUNICIPAL   FRANCHISES   IN  NEW   YORK.     375 

above  Seventy-ninth  Street  were  determined  in 
this  manner,  that  for  the  branch  to  Astoria  Ferry- 
being  fixed  at  three  per  cent  of  the  gross  receipts 
the  first  five  years  and  5  per  cent  thereafter.  In 
only  two  cases  *  was  an  auction  sale  of  the  fran- 
chise provided  for,  although  as  early  as  1857  the 
Legislature  had  decreed  that  any  stage  route  or 
privilege  thereafter  granted  by  the  Common  Coun- 
cil should  be  disposed  of  at  public  auction. 

The  granting  of  franchises  by  the  Legislature 
was  stopped  at  the  end  of  1874  by  a  constitutional 
amendment  prohibiting  special  legislation  granting 
the  right  to  lay  railroad  tracks,  or  any  exclusive 
privilege,  immunity,  or  franchise.  This  amend- 
ment also  laid  down  the  mode  of  procedure  which 
has  been  followed  ever  since  in  laying  out  new 
routes.  It  required,  besides  the  consent  of  the 
local  authorities,  the  consent  of  the  owners  of  one- 
half  in  value  of  the  abutting  property,  or  in  lieu 
thereof  the  approval  of  commissioners  appointed 
by.  the  General  Term  of  the  Supreme  Court,  con- 
firmed by  the  court  itself. 

The  first  general  Act  relating  to  street  railways 
as  distinct  from  other  railroads  was  passed  in  1884. 
It  gave  to  the  local  authorities  of  any  incorporated 
city  or  village  optional  power  to  sell  at  public  auc- 

1  The  Twenty-third  Street  and  One  Hundred  and  Twenty- 
fifth  Street  lines  (Laws  of  18G9,  chap.  823  ;  Laws  of  1870,  chap. 
504). 


376  MUNICIPAL   MONOPOLIES. 

tion,  after  due  notice,  franchises  to  construct,  op- 
erate, or  extend  street  railways.  Every  corporation 
constructing  a  street  railway  in  a  city  of  250,000 
or  more  inhabitants  was  required  to  pay  to  the 
sinking-fund  of  the  city  at  least  3  per  cent  of  the 
gross  receipts  for  the  first  five  years,  and  5  per 
cent  thereafter. 

The  vulnerable  point  in  this  well-meant  law  was 
at  once  disclosed  by  the  famous  Broadway  fran- 
chise steal,  when  the  Board  of  Aldermen,  overriding 
the  mayor's  veto  and  prescribing  no  compensation 
to  the  city  other  than  the  minimum  required  by 
the  statute,  bestowed  upon  the  Broadway  Surface 
Railroad  Company  a  route  from  Union  Square  to 
South  Ferry  for  which  the  Cable  Railway  Com- 
pany had  offered  a  bonus  of  $1,000,000.  This 
transaction  resulted  in  the  indictment  for  corrup- 
tion of  nearly  the  entire  Board  of  Aldermen  and 
the  officers  of  the  company ;  and  it  was  shown 
that  the  franchise  had  cost  the  company,  in  bribes 
of  $20,000  an  alderman  and  something  for  go-be- 
tweens, just  half  what  the  Cable  Railway  Company 
had  offered  to  pay  the  city  for  it.1  Only  two  or 
three  aldermen  were  finally  convicted  and  impris- 
oned, the  others  escaping  by  turning  state's  evi- 
dence, by  flight,  by  death,  and  by  the  law's  delay. 

1  Final  Report  of  the  Committee  on  Railroads  relative  to  the 
Broadway  Surface  Railroad  Company,  Senate  Document  No.  79, 
1886. 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     377 

Jacob  Sharp,  the  leading  spirit  of  the  railroad  com- 
pany, was  convicted  at  his  first  trial,  but  broke 
down  under  the  strain  and  died  while  awaiting  a 
second.  The  charter  of  the  offending  company 
was  promptly  annulled  by  the  Legislature  in  1886  ; 
but  the  Court  of  Appeals  held  that  the  franchise  or 
interest  in  the  street  was  perpetual  and  indefeasi- 
ble, and  hence  that  it  survived  the  corporation,  and 
vested  in  the  directors  as  trustees  for  the  creditors 
and  shareholders.1  The  General  Term  of  the  Su- 
preme Court,  however,  before  confirming  the  report 
of  its  commissioners  approving  the  route,  had  im- 
posed a  condition  under  which  the  city  secured 
$40,000  a  year,  besides  the  statutory  percentage 
and  car-license  fees.  Afterward,  when  the  Board 
of  Aldermen  granted  permission  for  the  use  of 
cables,  it  was  required  that  the  payments  should 
not  fall  below  $150,000  a  year. 

The  Broadway  scandal  was  quickly  followed  by 
the  passage  of  the  Cantor  Act  of  1886,  which  made 
the  sale  of  street-railway  franchises  at  auction  obli- 
gatory in  all  incorporated  cities  and  villages,  except 
in  the  case  of  companies  then  organized  in  places 
of  less  than  40,000  inhabitants ;  the  minimum 
compensation  for  cities  of  250,000  or  more  inhabi- 
tants was  fixed  as  before  at  3  per  cent  of  the  gross 
receipts  for  the  first  five  years  and  5  per  cent 
thereafter.     When  the  provisions  of  this  Act  were 

i  People  vs.  O'Brien,  111  N.Y.,  1. 


378  MUNICIPAL  MONOPOLIES. 

incorporated  into  the  General  Railroad  Law  of 
1890  their  application  was  restricted  to  cities  of 
90*000  or  more  inhabitants,  and  in  1892  it  was 
further  limited  to  the  single  city  of  New  York. 
"What  remained  of  the  auction  principle  seems  to 
have  been  repealed  by  section  77  of  the  Greater 
New  York  Charter,  which  provides  simply  that  sec- 
tion 93  of  chapter  565  of  the  laws  of  1890  and  its 
amendments  shall  have  no  application  to  grants 
made  under  this  title  of  the  charter.  The  language 
of  the  section  gave  no  hint  of  its  purport,  and  in 
the  hasty  consideration  of  the  charter  by  the  public 
and  by  the  Legislature  there  was  no  discussion  of 
the  point ;  indeed,  it  was  not  until  after  the  ad- 
journment of  the  Legislature  that  the  effect  of  the 
section  was  known  even  to  Senator  Cantor  himself, 
and  it  was  much  longer  before  the  secret  was  out 
in  the  City  Comptroller's  office.  As  if  to  add  to  the 
confusion  and  uncertainty  surrounding  the  subject, 
it  is  provided  in  another  part  of  the  charter  that 
"  nothing  in  this  Act  contained  shall  repeal  or  affect 
.  .  .  the  existing1  general  laws  of  the  State  in  re- 
spect  to  street  surface  railroads."  The  unseemly 
haste  with  which  the  charter  was  rushed  through 
the  Legislature,  without  opportunity  for  amendment 
or  free  discussion,  while  it  may  have  been  necessary 
if  there  was  to  be  a  Greater  New  York  that  winter, 
was,  to  say  the  least,  very  unfortunate.  If  there 
had  been  time  for  a  thorough  public  discussion  of 


MUNICIPAL   FllANCHISES   IX   NEW    YORK.     379 

the  important  provisions  of  the  charter,  as  there 
ought  always  to  be  when  a  fundamental  law  is 
about  to  be  adopted,  the  repeal  of  the  auction  prin- 
ciple certainly  would  not  have  passed  unchallenged, 
and  the  advocates  of  competitive  sales  would  have 
been  able  to  make  a  strong  showing  in  their  favor. 
The  Cantor  Act  was  not  without  serious  defects, 
chief  among  which  were  its  failure  to  prescribe  any 
limit  to  the  duration  of  franchises,  the  too  rigid 
minimum  price,  and  the  ease  with  which  corpora- 
tions could  escape  from  their  contracts  when  made. 
There  was  also  an  unnecessary  requirement  that 
bidders  must  be  already  incorporated  as  street-rail- 
way companies,  which  discouraged  free  competition 
because  of  the  heavy  expense  involved  in  incorpo- 
ration. All  of  these  defects  might  have  been  rem- 
edied by  a  closer  imitation  of  the  law  relating  to 
ferries.  But  even  as  it  stood,  the  Cantor  Act  was 
a  decided  success  as  compared  with  previous  con- 
ditions ;  it  effectually  prevented  bribery,  and  it  has 
added  something  to  the  present  and  future  reve- 
nues of  the  city.  Nearly  all  the  franchises  granted 
under  it  have  yielded  either  the  minimum  percent- 
age or  else  only  one  per  cent  or  less  above  the  min- 
imum, emphasizing  the  importance  of  a  movable 
upset  price ;  but  in  a  few  cases  the  competition 
between  bidders  has  resulted  in  unexpectedly  lib- 
eral offers.  In  1887  the  North  and  East  River 
Railroad  Company  secured  the  right  to  run  a  rail- 


380  MUNICIPAL  MONOPOLIES. 

way  through  Fulton  Street  for  35  per  cent  of  the 
gross  receipts  in  addition  to  the  legal  minimum. 
After  six  years  the  company  claimed  to  be  unable 
to  pay  the  percentage  agreed  upon,  and  submitted 
figures  to  show  that  it  had  been  losing  money; 
and  the  claim  of  the  city  was  accordingly  compro- 
mised by  the  Sinking  Fund  Commissioners  for  5£ 
per  cent.  Another  company  offered  29£  per  cent 
besides  the  minimum  percentages  for  a  crosstown 
line  in  Twenty-eighth  and  Twenty-ninth  Streets, 
which  was  never  operated  until  the  obliging  Sink- 
ing Fund  Commissioners  threw  off  all  but  the  legal 
minimum  and  one-half  of  one  per  cent.  In  the 
autumn  of  1895,  there  were  two  sales  at  remarka- 
bly high  figures,  although  the  routes  in  both  cases 
were  in  the  outlying  part  of  the  city  north  of  Morn- 
ingside  Heights.  The  route  commonly  known  as 
the  Third  Avenue  Extension,  although  it  lies  on 
the  western  side  of  the  city,  was  sold  to  the  Third 
Avenue  Railroad  Company  for  38£  per  cent  be- 
sides the  statutory  minimum  and  a  cash  bonus  of 
$250,000  ;  but  this  sale  has  been  annulled  *  on  the 
ground  that  the  extension  really  consisted  of  two 
separate  routes,  and  also  because  of  the  provision 
for  a  cash  bonus,  which  was  held  to  be  unwarranted 
by  the  statute.  The  other  sale  was  even  more  re- 
markable. There  were  three  bidders  at  first,  but 
one  soon  dropped  out.  The  others  continued  run- 
i  Beekman  vs.  Third  Avenue  R.  R.  Co.,  153  N.Y.,  144. 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     381 

ning  up  their  bids  until,  when  nearly  40  per  cent 
had  been  bid,  the  People's  Traction  Company  sud- 
denly offered  the  entire  receipts.  The  other  cor- 
poration retaliated  with  a  bid  of  100  per  cent 
besides  the  statutory  minimum.  This  bid  was  im- 
mediately protested  against  on  the  ground  that  no 
company  could  pay  more  than  the  entire  receipts ; 
but  the  Assistant  Corporation  Counsel  advised  the 
Comptroller  to  let  the  bidding  continue.  The  result 
was  that  at  the  close  of  office-hours  the  People's 
Traction  Company  had  offered  6,975TV  per  cent,  or 
nearly  seventy  times  the  entire  receipts.  The  next 
day  the  representatives  of  both  companies  were  on 
hand  to  continue  the  bidding,  but  the  third  com- 
pany had  obtained  an  injunction  against  the  con- 
tinuance of  the  sale.  Then  followed  a  year's 
litigation,  ending  in  the  award  of  the  franchise  to 
the  People's  Traction  Company  for  100  per  cent 
of  the  gross  receipts ;  but  the  case  has  been  ap- 
pealed by  the  defeated  company.  The  People's 
Traction  Company  explained  that  the  route  in 
question  was  needed  as  a  connecting  link  with  a 
proposed  road  beyond  the  city  limits,  and  accused 
both  its  competitors  of  being  "  dummy  "  corpora- 
tions, really  bidding  in  the  interest  of  the  "  Huckle- 
berry "  road. 

The  "  Huckleberry  "  road,  known  in  law  as  the 
Union  Railway  Company,  is  an  anomalous  corpo- 
ration whose  extraordinary  privileges  indicate  the 


382  MUNICIPAL  MONOPOLIES. 

unwillingness  of  the  Legislature  to  be  bound  by  its 
own  enactments.  It  was  created  in  1892  by  a  spe- 
cial Act,  and  was  granted  immunity  from  all  the 
provisions  of  the  General  Railroad  Law.  Appar- 
ently with  a  view  to  evading  the  constitutional 
prohibition  against  special  legislation  in  railway 
matters,  the  Act  was  drawn  as  an  amendment  to 
an  old  statute  of  1863,  which  had  authorized  the 
construction  of  railway  tracks  in  the  towns  of 
West  Farms  and  Morrisania.  The  act  of  1892 
authorized  the  original  company  to  consolidate 
with  any  other  street-railway  company  whose 
route  lay  north  or  east  of  the  Harlem.  Instead 
of  directing  a  public  sale  of  the  franchise,  it  sim- 
ply provided  that  the  Union  Railway  Company 
should  pay  1  per  cent  of  its  gross  earnings  when- 
ever they  should  exceed  an  average  of  $1,700  a 
day  for  six  months,  and  an  additional  1  per  cent 
for  each  multiple  of  that  amount,  in  lieu  of  all 
percentages  which  any  of  the  roads  consolidating 
to  form  the  new  company  were  required  to  pay ; 
so  that  no  revenue  has  been  received  from  this 
source.  Even  the  customary  requirement  of  pav- 
ing between  and  along  the  tracks  was  omitted, 
and  this  highly  favored  company  Mas  required 
merely  to  keep  in  repair  such  paving  or  macadam 
as  the  city  might  lay  between  the  rails  of  its  tracks. 
Grave  doubts  are  entertained  by  lawyers  as  to  the 
constitutionality  of  this  special  Act. 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     383 

During  recent  3-ears  nearly  all  the  street-railway 
lines  on  Manhattan  Island  have  been  absorbed, 
either  by  consolidation,  by  lease,  or  by  purchase  of 
stock,  by  the  Metropolitan  Street  Railway  Com- 
pany. The  only  rival  of  the  Metropolitan  Com- 
pany, as  far  as  surface  traffic  is  concerned,  is  now 
the  Third  Avenue  Railroad,  which  has  obtained 
control  of  the  only  lines  in  Manhattan  unaffiliated 
with  the  Metropolitan  system,  and  has  recently 
reached  out  into  the  Bronx  by  purchasing  a  con- 
trolling interest  in  the  "Huckleberry"  road.  The 
intense  rivalry  between  these  two  great  systems, 
besides  leading  to  an  offer  of  more  than  two-fifths 
of  the  gross  receipts  for  the  Third  Avenue  or 
Kingsbridge  Extension,  has  had  some  other  inte- 
resting, though  ineffectual,  results.  When  the 
Metropolitan  Company  applied  for  permission  to 
change  the  motive  power  on  the  Sixth  and  Eighth 
Avenue  lines  from  horses  to  underground  electri- 
city, after  a  very  successful  test  of  the  latter  power 
on  other  lines,  the  opposition  of  the  Third  Avenue 
Company  prevented  immediate  action ;  and  in  the 
meantime  public  sentiment  was  aroused  to  demand 
compensation  for  the  privilege.  Many  influential 
organizations,  representing  nearly  all  classes  in  the 
community,  urged  the  Board  of  Aldermen  to  take 
advantage  of  the  city's  reserved  right  of  purchas- 
ing the  roads  at  10  per  cent  more  than  the  cost  of 
construction,  in  order  to  lease  them  on  the  bust 


384  MUNICIPAL  MONOPOLIES. 

possible  terms.  The  Third  Avenue  Railroad  Com- 
pany offered  to  purchase  the  two  roads  from  the 
city  for  $1,000,000,  and  pay  5  per  cent  of  the 
gross  receipts,  or  to  lease  them  for  an  annual  ren- 
tal of  10  per  cent  of  the  cost  of  purchase  and  5 
per  cent  of  the  gross  receipts,  the  rental  not  to  fall 
below  $100,000  a  year.1  From  another  source  came 
an  offer  of  $2,000,000  and  percentages  amounting 
to  at  least  $100,000  a  year,  in  addition  to  the 
amount  required  to  purchase  the  existing  tracks  ;  2 
and  various  other  offers  were  made.  In  a  suit  to 
enjoin  the  Commissioner  of  Public  Works  from 
issuing  the  permit  for  change  of  power  on  the 
Eighth  Avenue  line,  the  right  of  the  city  to  re- 
quire the  surrender  of  the  property  has  been 
denied  by  the  Court  of  Appeals 3  on  the  ground 
that  the  Common  Council  had  exceeded  its  powers 
in  granting  the  franchise  of  1851.  The  grant  had 
been  confirmed  by  the  Legislature  three  years  later; 
and  the  Court  of  Appeals  had  held,  in  a  case  in- 
volving the  liability  of  the  company  to  license  fees, 
that  the  confirmation  extended  to  the  contract  be- 
tween the  city  and  the  company ; 4  but  the  court 
now  refused  to  adopt  this  view  with  reference  to 
the  part  of  the  contract  under  consideration. 

1  City  Record,  April  1  and  June  3,  1897. 
-  Ibid,  May  14,  June  14,  and  June  22,  1897. 

3  Potter  vs.  Collis,  156  N.Y.,  16. 

4  Mayor,  etc.,  of  the  City  of  New  York  vs.  Eighth  Avenue 
R.  R.  Co.,  118  N.Y.,  389. 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     385 

Although  nothing  came  of  this  project  for  muni- 
cipal ownership,  the  city  does  own  half  a  mile  of 
double  track  in  one  of  the  transverse  roads  through 
Central  Park.  The  Legislature  in  1888  author- 
ized the  Department  of  Public  Parks  to  have 
this  track  laid,  with  the  concurrence  of  the  Sink- 
ing Fund  Commissioners;  and  the  work  was  done 
by  contract  at  a  cost  of  $11,998,  including  an  in- 
spector's fee  of  $ 48.  The  operation  of  the  road 
was  delegated  to  the  Second  Avenue  Railroad, 
now  a  part  of  the  Metropolitan  system.  The  ren- 
tal is  $300  a  year,  or  only  2^  per  cent  on  the 
investment. 

Aside  from  the  rental  of  this  municipal  line,  the 
city  revenue  from  street-railway  franchises  was 
$302,111  in  1896,  and  $351,883  in  1897.  Nearly 
one-half  of  these  amounts  was  for  the  Broadway 
franchise,  and  nearly  all  of  the  remainder  was  for 
other  lines  controlled  by  the  Metropolitan  Com- 
pany. The  Third  Avenue  Company  pays  nothing 
at  all  on  its  main  line,  claiming  that  the  Revised 
Ordinances  impose  license  fees  on  horse-cars  only ; 
and  this  question  is  before  the  courts.  The  amount 
received  for  street-railway  franchises  has  usually 
been  much  less  than  the  revenue  from  ferries,  al- 
though in  some  cases  the  City  of  New  York  con- 
trols only  one  end  of  the  latter.  It  is  safe  to  say 
that  the  street-railway  franchises  are  worth  much 
more  than  the  ferry  privileges  ;  and  the  inevitable 


386  MUNICIPAL  MONOPOLIES. 

conclusion  is,  that  the  greater  success  in  dealing 
with  the  ferries  is  clue  to  the  longer  time  and 
more  perfect  manner  in  which  the  system  of  pub- 
lic sale  has  been  in  force.  The  amounts  given 
in  both  cases  are  in  addition  to  taxes,  which  in  the 
case  of  the  street  railways  amount  to  more  than 
the  franchise  payments,1  being  levied  on  earnings 
and  on  dividends  as  well  as  on  the  tracks  and 
other  property.2  The  revenue  from  railway  fran- 
chises, however,  is  sure  to  increase  rapidly  as  the 
lines  authorized  within  the  past  five  years  become 
subject  to  the  5  per  cent  minimum. 

In  connection  with  their  taxes  and  franchise 
payments,  the  railway  companies  are  required  to 
make  financial  reports  annually  to  both  State  and 
City  Comptrollers  ;  and  both  officers  have  power 
to  examine  the  companies'  books.  More  elaborate 
reports,  including  much  besides  financial  state- 
ments, are  made  to  the  State  Railroad  Commission, 
which  has  a  general  supervision  over  all  the  rail- 
roads in  the  State.  This  Commission  is  author- 
ized to  make  recommendations,  which,  if  just  and 
reasonable,  may  be  enforced  by  the  courts.  The 
burden  of  supporting  the  Commission  is  divided 
among  all  the  railways,  one-half  in  proportion  to 

1  City  Record,  May  13,  1897. 

2  The  rates  are  1  per  cent  of  the  gross  earnings  and  3  per  cent 
of  the  dividends  in  excess  of  4  per  cent  of  the  actually  paid-up 
capital.  Laws  of  1806,  chap.  008,  §185.  There  is  also  a  general 
tax  on  the  organization  of  corporations. 


MUNICIPAL   FRANCHISES   IN  NEW   YORK.     387 

net  income,  and  one-half  in  proportion  to  mile- 
age ;  and  the  fees  for  this  purpose  are  added  to 
their  taxes.  As  the  duties  of  the  Commission  ex- 
tend to  all  railroads,  the  street  railways  necessarily 
receive  but  a  small  part  of  its  attention.  Various 
municipal  authorities  also  exercise  some  authority 
over  them,  sometimes  concurrently  with  the  State 
Commission.  Thus,  the  form  of  the  rails  must  be 
approved  by  the  Commissioner  of  Highways,  and 
the  Board  of  Health  claims  jurisdiction  where 
safety  is  involved,  although  the  State  board  also 
takes  cognizance  of  both  these  matters.  No 
authority  has  been  able  thus  far  to  prevent  over- 
crowding, which  indeed  seems  unavoidable  in  New 
York  at  present,  because  in  Broadway  at  least  the 
tracks  are  already  utilized  to  about  their  full  capa- 
city ;  but  the  Board  of  Health  has  attacked  this 
problem  also,  besides  requiring  a  certain  proportion 
of  closed  cars  all  summer.  The  chief  problem 
relating  to  safety  has  arisen  in  connection  with 
the  dangerous  curve  at  Broadway  and  Fourteenth 
Street,  around  which  the  cable  cars  were  until 
recently  accustomed  to  swing  at  full  speed.  As 
a  result,  this  famous  curve  was  immortalized  in 
magazine  fiction,  and  acquired  the  appropriate 
newspaper  name  of  "  Dead  Man's  Curve."  It  was 
not  until  after  a  long  discussion  of  slow  cables, 
tunnels  under  Union  Square,  short  cuts  through 
private  property,  and  other  plans,  that  the  Metro- 


388  MUNICIPAL  MONOPOLIES. 

politan  Company  at  last  adopted  the  simple  expe- 
dient of  a  different  grip  permitting  a  reduction  of 
speed. 

Oversight  by  permanent  State  and  local  officials 
was  supplemented  by  the  appointment  in  1895 
of  a  special  Assembly  Committee  to  investigate 
the  street  railways  of  the  State.  The  committee 
found  a  great  deal  of  the  most  flagrant  over-capi- 
talization, covering  up  exorbitant  profits.  It 
recommended  bills  limiting  capitalization  to  one 
and  one-half  times  the  cost  of  construction,  and 
requiring  companies  earning  more  than  five  per 
cent  on  their  stock  to  sell  thirty  tickets  for  a 
dollar  for  morning  and  evening  traffic.  But  the 
agitation  which  followed  was  ineffectual.  With 
the  present  five-cent  fares,  the  cost  of  operation  is 
only  54.11  per  cent  of  the  gross  earnings  on  the 
Metropolitan  lines,  and  55.62  per  cent  of  the  gross 
earnings  on  the  Third  Avenue  System.1 

The  Assembly  Committee  took  some  testimony 
with  reference  to  cost  of  construction,  among  other 
things,  but  learned  comparatively  little  about  the 
cost  of  the  New  York  City  lines.  Officials  of  the 
Syracuse  trolley  roads  testified  that  the  cost  of  con- 
struction in  that  city  was  nearly  $13,000  per  mile 
of  single  track,  without  overhead  construction,  or 
about  $16,000  altogether,  aside  from  the  cost  of 

1  Report  of  the  Board  of  Railroad  Commissioners,  1897,  vol.  ii., 
pp.  1017,  1137. 


MUNICIPAL   FRANCHISES  IN  NEW   YOliK.     389 

paving  between  the  rails.  On  the  other  hand,  the 
cost  of  the  Albany  Railway  was  shown  to  he  only 
$11,477  a  mile,  including  $4,000  for  overhead 
construction,  and  that  of  the  "  Huckleberry  "  Road 
only  $10,500  or  $11,000  a  mile  ;  the  expensive  90- 
pound  girder  rails  being  used  in  both  cases.  The 
cost  of  horse-car  tracks  in  New  York  City  at  the 
time  of  the  inquiry  was  stated  to  be  about  $6,000 
a  mile ;  the  line  across  Central  Park,  which  cost 
the  city  twice  that  amount,  was  built  several  years 
before,  on  concrete  foundation,  and  by  contract. 
A  high  official  of  the  Third  Avenue  Company  tes- 
tified that  the  most  difficult  cable  construction  had 
cost  $  100,000  per  mile  of  double  track,  and  esti- 
mated the  cost  in  ordinary  streets  at  60  per  cent 
of  that  amount.1  The  equipment  of  the  Metropoli- 
tan line,  where  cars  run  very  close  together,  is 
reported  by  the  company  at  $42,222  per  mile  of 
road.  .  Yet  this  company  is  capitalized  at  more 
than  $2,275,000  per  mile  of  road  owned,  including 
cable,  horse,  and  underground  electric  lines.  The 
stock  and  bonds  of  the  Third  Avenue  Company 
amount,  to  a  little  more  than  $1,000,000  a  mile, 
while  the  trolley  lines  of  the  "  Huckleberry  "  Road, 
which  watered  its  stock  through  the  common  ex- 

1  Report  and  Testimony  of  the  Special  Committee  of  the  As- 
semhly  to  Investigate  the  Desirahility  of  Municipal  Ownership 
of  the  Street  and  Elevated  Railroads  of  the  Various  Cities  of  the 
State.  Assembly  Document  No.  53,  1896,  pp.  694,  910,  973.  1097, 
1165, 1376. 


390  MUNICIPAL   MONOPOLIES. 

peclient  of  a  construction  company,  stand  charged 
with  $187,000  per  mile  of  single  track.  The  over- 
capitalization of  some  of  the  horse-car  lines  is 
equally  flagrant.  Although  the  merging  of  half-a- 
dozen  corporations  into  the  Metropolitan  Street 
Railway  Company  was  accomplished  without  any 
increase  of  the  total  capital,  it  was  followed  by  a 
sudden  increase  of  the  capital  stock  from  $16,500,- 
000  to  $30,000,000,  and  later  by  other  stock  and 
bond  issues  made  necessary  in  part  by  the  intro- 
duction of  electric  power ;  yet  the  stock  quotations 
are  rapidly  approaching  200.  The  rentals  paid  to 
lesser  companies,  with  one  exception,  range  from 
8  to  15  and  18  per  cent  on  the  stock,  besides  in- 
terest on  the  bonds.  The  dividend  of  the  Metro- 
politan Company  itself  is  only  5  per  cent  a  year ; 
the  Third  Avenue  Company  pays  about  8  or  9  per 
cent,  and  its  stock  ranges  from  145  to  194£. 

INCOME  ACCOUNTS,  1896-1897. 

Metropolitan      Third  Avenue 


Street  Ry.  Co. 

R.  R.  Co. 

Gross  earnings  from  operation, 

$8,888,805 

2,590,474 

Operating  expenses, 

4,810,235 

1,440,768 

Net  earnings  from  operation, 

4,078,570 

1,149,706 

Income  from  other  sources, 

646,220 

45,442 

Total  income, 

4,724,790 

1,195,148 

Taxes,  etc., 

545,176 

117,283 

Net  divisible  income, 

4,179,614 

1,077,865 

Rentals, 

2,171,800 

Interest  on  funded  debt, 

470,000 

250,000 

Dividends. 

1,200,000 

875,000 

Surplus  (+)  or  deficit  (— )  for  the  y< 

sar,      +337,814 

-47,135 

MUNICIPAL   FRANCHISES  IN  NEW   YORK.     391 

The  foregoing  table  shows  the  income  accounts 
of  these  two  companies  for  the  year  ending  June 
30,  1897,  at  which  date  they  were  capitalized  at 
$39,400,000  and  $  15,000,000  respectively. 

in.      THE   ELEVATED    RAILWAY. 

The  demand  for  quicker  transportation  than  that 
afforded  by  horse-cars  led  as  early  as  1866  to  the 
appointment  of  a  Senate  Commission,  which,  after 
advertising  for  plans  at  home  and  abroad,  reported 
in  favor  of  the  plan  for  an  elevated  cable  railway 
submitted  by  Mr.  C.  T.  Harvey.  The  Legislature 
accordingly  passed  an  Act  providing  for  a  short  ex- 
perimental line  of  that  description  in  Greenwich 
Street,  to  be  constructed  by  the  West  Side  and 
Yonkers  Patent  Railway  Company.  After  the  ap- 
proval of  this  line  by  commissioners  provided  for 
in  the  Act,  it  was  to  be  extended  and  operated  un- 
der the  direction  of  the  same  commissioners.  The 
fare  was  fixed  at  5  cents  for  less  than  two  miles, 
and  one  cent  for  each  additional  mile ;  but  the  com- 
pany was  given  the  option  of  adopting  a  uniform 
fare  of  10  cents  for  a  limited  period,  after  the  road 
should  be  completed  to  the  Harlem.  The  city  was 
to  receive  5  per  cent  of  the  net  income  as  compen- 
sation for  the  use  of  the  streets.  An  Act  of  the 
following  year  devoted  the  proceeds  to  the  improve- 
ment of  the  streets  occupied  by  the  structure,  and 


392  MUNICIPAL  MONOPOLIES. 

declared  the  payment  to  be  a  matter  of  agreement 
in  the  nature  of  a  contract,  entitling  the  company 
to  the  privileges  and  rates  of  fare  specified  ;  though 
at  the  same  time  the  Legislature  expressly  reserved 
the  right  to  "alter,  modify  or  repeal  this  Act." 
The  Commission  reported  favorably  upon  the  ex- 
perimental section ;  and  the  company,  under  its  new 
name  of  the  West  Side  Elevated  (Patented)  Rail- 
way Company,  constructed  a  single  track  as  far  as 
Thirtieth  Street.  The  road  was  not  at  first  finan- 
cially successful,  and  having  been  sold  at  a  sheriff's 
sale,  was  acquired  in  1871  by  the  New  York  Ele- 
vated Railroad  Company,  which  extended  the  ori- 
ginal Ninth  Avenue  line  northward,  and  built  a  line 
also  in  Third  Avenue. 

The  Second  and  Sixth  Avenue  lines  were  con- 
structed by  the  Gilbert  (afterward  the  Metropoli- 
tan) Elevated  Railway  Company,  incorporated  in 
1872.  The  fare  on  these  lines  also  was  fixed  at 
10  cents,  but  the  company  was  required  to  run 
special  cars  and  trains  morning  and  evening  at  half- 
fare.  The  so-called  "  Rapid  Transit  Act  "  of  1875 
provided  for  the  appointment  of  commissioners  to 
determine  the  necessity  for  new  routes,  and  decide 
upon  the  plans,  the  time  for  construction,  the  max- 
imum rates  of  fare,  and  the  hours  during  which 
special  cars  and  trains  should  be  run  at  reduced 
fares ;  and  both  companies  completed  their  roads 
under  this  Act.     The  routes  proposed  for  the  New 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     393 

York  Elevated  Railroad  Company  were  so  opposed 
by  property  owners  that  it  was  necessary  to  obtain 
the   consent  of    commissioners   appointed  by   the# 
General  Term  of  the  Supreme  Court,  approved  by 
the  court  itself  and  finally  by  the  Court  of  Appeals.1 

The  Manhattan  Railway  Company  was  organ- 
ized in  1875  under  the  auspices  of  the  Rapid  Tran- 
sit Commissioners,  and  in  1879  gained  control  of 
all  four  lines  by  leases  for  999  years,  or  as  long  as 
it  should  continue  to  exist  as  a  corporation.  The 
new  company  agreed  to  pay  to  each  of  the  old 
companies  interest  and  principal  on  $ 8,500,000  of 
bonds,  10  per  cent  dividends  (afterward  reduced 
to  6  per  cent)  on  $6,500,000  of  stock,  and  a  rental 
of  $10,000  yearly,  besides  issuing  its  own  stock 
to  the  amount  of  $13,000,000,  representing  only 
water,  for  pro  rata  distribution  among  the  stock- 
holders of  the  other  two  companies ;  thus  making 
the  total  capitalization  $43,000,000.  This  agree- 
ment was  afterwards  replaced  by  a  consolidation 
of  the  three  companies. 

The  Manhattan  Company  was  originally  per- 
mitted to  collect  a  10-cent  fare  from  the  Battery 
to  Fifty-ninth  Street,  or  15  cents  to  the  Harlem, 
but  was  required  to  run  half-fare  cars  morning  and 
evening.  In  1880  Mr.  William  W.  Astor  intro- 
duced a  bill  at  Albany  reducing  the  fare  to  5  cents 
at  all  hours ;  and  the  Board  of  Aldermen  unani- 
i  Matter  of  New  York  Elevated  R.R,  Co.,  70  NX,  327. 


394  MUNICIPAL  MONOPOLIES. 

mously  passed  a  resolution  urging  its  passage,  but 
in  vain.  In  1883  a  similar  Act  was  passed  by  the 
•  Legislature,  but  vetoed  by  Governor  Cleveland. 
The  chief  reasons  given  for  the  veto  were,  (1)  that 
there  was  a  contract  as  to  the  rates  of  fare,  and 
(2)  that  if  the  Legislature  had  power  to  reduce  the 
fare  at  all,  it  had  by  statute  promised  not  to  do  so 
until  it  should  be  ascertained  that  the  return  on 
the  capital  invested  exceeded  10  per  cent.  The 
Legislature  accordingly  directed  the  State  Railroad 
Commission  to  examine  into  the  financial  condition 
of  the  company.  The  majority  of  the  Commission, 
by  including  taxes  under  operating  expenses,  found 
that  the  net  income  was  about  7i  per  cent  on  a 
capital  expenditure  of  $22,683,253,  and  decided 
that  it  would  be  illegal  and  unjust  to  innocent  pur- 
chasers of  stock  to  reduce  the  fare.  The  minority 
made  the  capital  actually  expended  a  little  less, 
and  the  net  income  10.68  per  cent;  and  recom- 
mended an  extension  of  the  5-cent  hours  morning 
and  evening.  The  $13,000,000  issue  of  stock  was 
characterized  as  "  only  a  pja-amid  of  water,  on  a 
pedestal  of  transparent  fraud."  1 

The  average  fare  at  this  time  was  6.86  cents,  of 
which  1.62  cents  was  devoted  to  interest  on  bonds, 
and  .99  of  a  cent  was  applicable  to  dividends. 
The  profit   on  each  passenger  was  therefore   2| 

1  Report  of  the  Board  of  Railroad  Commissioners  in  Response 
to  a  Resolution.     Assembly  Document  No.  162,  1883. 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     395 

cents.  The  company  estimated  that  in  order  to 
derive  the  same  revenue  from  a  uniform  5-cent 
fare  it  would  he  necessary  to  carry  327,320  pas- 
sengers a  day,  or  90,714  more  than  it  was  then 
carrying.  That  point  was  easily  passed  four  years 
later,  when  the  fare  was  finally  reduced  to  5  cents 
at  all  hours.  The  number  of  passengers  at  once 
increased  from  115,109,591  to  158,963,232  in  a 
year ;  and  there  was  no  interruption,  but  rather  an 
acceleration,  of  the  steady  gain  in  gross  receipts, 
though  the  net  earnings  showed  a  slight  falling  off 
the  first  year.  The  high-water  mark  of  traffic  was 
reached  in  the  year  1892-1893,  when  the  number 
of  passengers  carried  was  219,621,017.1  Since 
then  the  competition  of  the  cable  and  electric  roads 
has  affected  the  business  somewhat ;  but  the  com- 
pany still  carries  more  than  180,000,000  passen- 
gers a  year,  and  until  recently  paid  o  per  cent 
dividends  on  $30,000,000  of  stock,  besides  interest 
on  bonded  indebtedness.  But  for  three  or  four 
years  this  necessitated  drawing  to  some  extent 
upon  the  accumulated  surplus,  and  so  the  quar- 
terly dividends  were  reduced  in  1897  to  1  per  cent. 
In  the  year  ending  June  30,  1897,  the  gross 
earnings  were,  from  operation,  $9,163,743,  and 
from  other  sources,  $180,277  ;   the  operating  ex- 

1  This  figure  is  for  the  fiscal  year  ending  Sept.  30.  Investors' 
Supplement  to  the  Commercial  and  Financial  Chronicle,  Apr. 
30,  1898,  p.  82. 


396  MUNICIPAL   MONOPOLIES. 

penses  were  $5,302,352,  taxes  $820,171,  and  inte- 
rest on  funded  indebtedness  $1,886,846  ;  leaving 
only  $1,334,651  of  the  year's  income  applicable 
to  dividends.  The  operating  expenses  were  not 
quite  three  cents  for  each  passenger.1  The  stock 
and  bonds  now  amount  to  nearly  $70,000,000,  or 
a  little  less  than  $2,000,000  a  mile.  The  cost  of 
construction  is  said  to  have  been  $750,000  a  mile  ; 
but  in  1892-1893  construction  of  a  similar  char- 
acter in  Brooklyn  cost  only  $297,599  a  mile,  and 
doubtless  the  cost  of  duplication  would  now  be 
still  lower.  The  cost  of  the  equipment  is  returned 
at  $124,515  a  mile,  and  some  allowance  should  be 
made  for  damages  to  property  owners  ;  but  making 
all  possible  allowances,  it  is  evident  that  the  value 
of  the  roads  is  due  mainly  to  the  franchise.  The 
elevated  railway  is  taxed  in  the  same  manner  as 
street  railways,  the  structure  being  assessed  as 
real  estate.  For  several  years  the  Manhattan 
Company  also  paid  to  the  city  5  per  cent  of  the 
receipts  of  the  Third  and  Ninth  Avenue  lines,  as 
the  New  York  Elevated  Railroad  Company  had 
been  required  to  do  ;  but  in  1894  the  Court  of 
Appeals  relieved  it  from  paying  anything  on  the 
Third  Avenue  line  and  on  the  upper  and  newer 
portion  of  the  Ninth  Avenue  line.  The  "  Rapid 
Transit"  Act  of  1875  had  provided  that  a  com- 

1  Fifteenth  Annual  Report  of  Board  of  Railroad  Commissioners, 
vol.  ii.,  pp.  806-809. 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     397 

pany  might  build  connecting  routes  "  with  all  the 
rights  and  with  like  effect  as  though  the  same  had 
been  a  part  of  the  original  route  ;  "  but  the  court 
held  that  this  had  reference  to  powers  only,  and 
not  to  burdens.1  The  complicated  state  in  which 
the  court  left  the  matter  has  necessitated  so  much 
accounting  and  additional  litigation  that  it  is  not 
yet  determined  how  much  is  due  the  city,  and  so 
of  late  years  nothing  has  been  paid. 

IV.     RAPID    TRANSIT. 

Plans  for  underground  transit  on  Manhattan 
Island  began  to  be  seriously  broached  at  about  the 
same  time  that  the  first  elevated  road  was  begun  ; 
and  a  number  of  companies  were  organized  and 
secured  franchises  for  underground  roads  which 
were  never  built.  In  1868  the  New  York  City 
Central  Underground  Railway  Company  was  in- 
corporated to  build  a  railway  from  City  Hall  Park 
under  Mulberry  Street  and  Fourth  Avenue  to 
Ninety-ninth  Street,  and  thence  in  the  open  air  to 
the  Harlem  River.  In  1872  the  Metropolitan 
Transit  Company  was  created  and  empowered  to 
build  both  an  elevated  and  an  underground  rail- 
way on  the  west  side  of  the  city,  for  the  most  part 
through  private  property.     The  next  year  saw  a 

1  Mayor,  etc.,  of  the  City  of  New  York  vs.  Manhattan  Railway 
Co.,  143  New  York,  1. 


398  MUNICIPAL   MONOPOLIES. 

charter  for  100  years  granted  to  the  New  York 
City  Rapid  Transit  Company,  organized  by  Cor- 
nelius Vanderbilt,  for  a  tunnel  railway  under  the 
Bowery  and  Third  and  Fourth  Avenues.  The  Act 
declared  this  use  of  the  streets  to  be  a  public  pur- 
pose, and  gave  this  as  a  reason  for  exacting  no 
compensation  for  the  franchise.  The  Broadway 
Underground  Railway  Company,  also  chartered 
originally  in  1873  as  the  Beach  Pneumatic  Transit 
Company,  was  authorized  the  next  year  to  build  a 
railway  under  Broadway  and  Madison  Avenue. 
Franchises  for  tunnels  under  the  East  and  North 
Rivers  also  began  to  be  granted  before  1870. 

The  elevated  railway  system  lessened  for  a  time 
the  demand  for  more  rapid  transit,  but  it  was  soon 
found  to  be  quite  inadequate ;  and  again  during 
the  80's  projects  for  underground  transit  were 
brought  forward  by  several  corporations.  The 
Rapid  Transit  Act  of  1891  provided  for  the  ap- 
pointment of  a  Board  of  Rapid  Transit  Commis- 
sioners to  determine  whether  it  was  for  the  interest 
of  the  public  and  of  the  city  that  a  rapid-transit 
railway  should  be  constructed,  and  if  so  to  estab- 
lish the  route  and  plans  of  construction,  obtain 
the  necessary  consents,  and  sell  at  auction  the 
privilege  of  constructing  the  road  and  operating  it 
for  a  term  of  years.  That  privilege  was  accord- 
ingly offered  for  sale  at  the  end  of  1892,  the  dura- 
tion of  the  franchise  being  fixed  at  999  years ;  but 


MUNICIPAL  FRANCHISES  IN  NEW  YORK.     399 

there  was  only  one  bidder,  who  offered  first  $500 
cash  and  one-half  of  one  per  cent  of  the  receipts, 
and  then  $1,000  cash.  The  Commission  rejected 
these  bids,  and  decided  to  abandon  the  under- 
ground scheme  in  favor  of  some  extension  of  the 
elevated  system;  but  the  following  winter  the 
situation  was  changed  by  a  comprehensive  revision 
of  the  Rapid  Transit  Act.  A  new  Board  of  Com- 
missioners was  named,  with  duties  similar  to  those 
of  its  predecessor ;  but  after  securing  the  necessary 
consents,  it  was  to  submit  to  popular  vote  the 
question  whether  the  road  should  be  constructed 
at  public  expense.  In  case  of  an  affirmative  vote, 
the  Commission  was  directed  to  advertise  for  pro- 
posals, and  enter  into  a  contract  with  the  best 
qualified  person,  firm,  or  corporation  for  the  con- 
struction of  the  road  for  a  certain  sum  of  money, 
and  its  operation  for  a  term  of  from  35  to  50  years, 
under  the  regulation  of  the  Commission  ;  other- 
wise, the  privilege  of  constructing  the  road  and 
operating  it  for  a  term  of  years  was  to  be  sold  at 
auction  as  before.  The  referendum  thus  provided 
for  resulted  in  an  overwhelming  majority  for  muni- 
cipal construction,  but  the  requisite  consents  of 
property  owners  could  not  be  obtained ;  accord- 
ingly the  General  Term  of  the  Supreme  Court 
appointed  three  commissioners,  who,  after  taking 
volumes  of  testimony  and  considering  the  question 
in  all  its  phases,  reported  that  the  road  ought  to 


400  MUNICIPAL   MONOPOLIES. 

be  and  could  be  constructed.  But  these  commis- 
sioners considered  it  no  part  of  their  duty  to  deter- 
mine the  cost ;  and  by  reason  of  this  omission  the 
Appellate  Division  of  the  Supreme  Court,  to  which 
the  report  was  made  under  the  new  State  constitu- 
tion, refused  to  give  its  approval.  The  engineer 
of  the  Rapid  Transit  Commission  had  estimated 
the  cost  at  less  than  $39,000,000,  or,  making 
liberal  allowance  for  unexpected  contingencies, 
not  quite  $50,000,000  at  most.  His  estimate  was 
based  upon  unit  costs  ascertained  by  numerous 
borings,  was  corroborated  by  the  history  of  tun- 
nel construction  in  London,  Glasgow,  Boston,  Bal- 
timore, and  other  cities,  and  of  the  excavations 
for  the  cable  road  in  Broadway  itself,  and  was 
further  confirmed  by  six  distinguished  technical 
experts,  as  well  as  by  practical  business  men  who 
contemplated  becoming  interested  in  the  contract. 
But  engineers  of  existing  local  transit  systems 
declared  the  estimate  too  low ;  and  the  court 
declared  that  "  the  disposition  seems  to  be  to  enter 
upon  this  enterprise  regardless  of  and  in  utter 
ignorance  of  the  cost."  The  court  also  objected 
to  the  proposed  road  because  it  was  not  to  extend 
to  the  city  limits.1 

Again  it  was  thought  necessary  to  give  up  the 
underground    plan  and    resort  to    extending    the 

l  Matter  of  Rapid  Transit  Commissioners,  5  App.  Div.,  290 
(1896). 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     40l 

routes  and  increasing  the  carrying  capacity  of 
the  elevated  railway;  but  the  public  demand  for 
the  underground  road  was  so  strong  that  finally 
new  plans  were  prepared  so  as  to  meet  the  court's 
objections.  The  original  Broadway  route,  which 
was  rendered  very  expensive  by  engineering  diffi- 
culties, was  largely  abandoned.  The  new  route 
was  from  the  Battery  to  the  Post-office  under 
Broadway,  thence  under  Park  Row,  New  Elm 
Street,  Lafayette  Place,  and  Fourth  Avenue  to 
the  Grand  Central  Station,  thence  by  way  of 
Forty-Second  Street,  Broadway,  the  Boulevard,  and 
other  streets  to  Kingsbridge,  with  a  branch  under 
One  Hundred  and  Fourth  Street,  Central  Park, 
and  Lenox  Avenue,  crossing  under  the  Harlem  at 
One  Hundred  and  Forty-fifth  Street,  and  thence 
extending  northeasterly  to  Bronx  Park.  There 
were  to  be  four  tracks  from  the  Post-office  to  One 
Hundred  and  Fourth  Street.  The  extreme  north- 
ern portions  of  the  road  were  to  be  on  viaducts 
instead  of  underground,  and  this  cheaper  construc- 
tion, together  with  other  economies,  made  it  possi- 
ble to  extend  the  tracks  from  two  and  one-half  to 
four  miles  farther  north  than  under  the  former 
plan.  The  total  length  of  the  new  route  was 
nearly  22  miles,  and  its  cost  was  not  to  exceed 
$35,000,000.  As  in  the  original  plan,  sewers, 
water  and  gas  pipes,  and  other  conduits  along 
part  of  the  route  Avere  to  be  placed  in  galleries 


402  MUNICIPAL  MONOPOLIES. 

easily  accessible  from  the  tunnel.  These  galleries 
were  to  remain  in  charge  of  the  Rapid  Transit 
Commission,  and  as  new  pipes  were  introduced 
they  were  to  become  a  source  of  revenue. 

The  commission  again  failed  to  obtain  the  ne- 
cessary consents  of  property-owners  along  portions 
of  the  new  route,  and  again  Supreme  Court  com- 
missioners were  appointed  to  determine  whether 
the  road  ought  to  be  built.  These  commissioners 
studied  the  financial  aspects  of  the  problem,  and 
were  able  to  report  that  the  road  could  be  built 
well  within  the  estimate  of  the  Rapid  Transit 
Commission,  and  that  the  earnings  would  un- 
doubtedly be  sufficient  to  pay  all  expenses  and 
debt  charges.  They  also  declared  the  undertak- 
ing to  be  absolutely  necessary  and  legally  possible. 
The  Appellate  Division  of  the  Supreme  Court 
agreed  with  its  commissioners  that  the  proposed 
road  was  an  "imperious  necessity,"  and  confirmed 
their  report ;  but  it  made  it  a  condition  of  its  con- 
sent that  a  bond  of  $15,000,000  should  be  required 
of  the  contractor.  The  corporations  which  had  been 
organized  to  bid  for  the  contract  were  discouraged 
by  the  requirement  of  this  excessive  bond;  yet 
the  Metropolitan  Street  Railway  Company  might 
have  undertaken  the  work,  had  it  not  been  for  the 
unfriendly  attitude  of  the  new  city  administration 
toward  the  rapid  transit  project.  The  court's  decis- 
ion*was  criticised  not  only  on  grounds  of  public 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     403 

policy,  but  also  because  the  Rapid  Transit  Act 
left  the  conditions  of  the  contract  to  be  fixed  by 
the  Rapid  Transit  Commission ;  but  the  Appellate 
Division  cited  the  case  of  the  Broadway  Surface 
road  as  a  precedent  for  its  assumption  of  power, 
and  refused  to  modify  its  requirement  except  by 
permitting  a  reduction  of  the  bond  to  $1,000,000 
after  the  completion  of  the  road.1  Once  more  the 
Rapid  Transit  Commission  was  obliged  to  resort 
to  negotiations  with  the  Manhattan  Railway  Com- 
pany, looking  to  extensions  of  the  elevated  road; 
but  it  was  found  impossible  to  agree  upon  terms. 

The  city  has  authority  to  issue  bonds  to  the  ex- 
tent of  $55,000,000,  bearing  not  more  than  3£  per 
cent  interest,  to  pay  for  the  construction  of  the 
Rapid  Transit  road  and  the  acquisition  of  neces- 
sary property  and  easements.  If  a  contract  should 
still  be  let  under  the  present  law,  the  contractor 
will  be  required  to  pay,  as  rental  for  the  use  of  the 
road  when  completed,  the  interest  and  at  least  1 
per  cent  additional  upon  the  cost  of  construction, 
including  the  price  of  lands  acquired  in  fee  ;  but 
the  Rapid  Transit  Commission  may  in  its  discre- 
tion waive  the  payment  of  the  additional  1  per 
cent  for  the  first  five  years,  and  reduce  it  one-half 
the  second  five  years,  unless  the  contractor's  profits 
exceed  5  per  cent  during  the  first  period  or  5£ 

1  Matter  of  Rapid  Transit  Ii.R.  Comrs.,  26  App.  Div.,  608 
(March,  1898). 


404  MUNICIPAL  MONOPOLIES. 

per  cent  during  the  second.  After  providing  for 
the  interest  on  the  bonds,  the  remainder  of  the 
rental  will  be  paid  into  the  sinking  fund  of  the 
city.  It  is  announced,  however,  that  this  law  will 
be  amended. 

The  constitutionality  of  the  Rapid  Transit  Act 
has  been  affirmed  by  the  Court  of  Appeals,  in  a 
suit  brought  by  a  newspaper  corporation  which 
had  failed  to  defeat  the  project  in  its  own  paper. 
It  was  contended  that  the  Rapid  Transit  Act  was 
socialistic,  and  that  it  violated  the  provisions  of 
the  State  constitution  prohibiting  cities  from  incur- 
ring indebtedness  for  other  than  city  purposes,  or 
loaning  their  property  or  credit ;  for  it  was  claimed 
that  city  purposes  did  not  include  the  building  of 
rapid-transit  railways,  and  that  leasing  a  municipal 
railway  to  a  private  corporation  would  be  in  effect 
loaning  the  city's  credit.  There  was  little  to  sup- 
port these  contentions,  especially  as  the  municipal 
construction  of  the  bridge  and  railway  across  the 
East  River  had  been  upheld  by  the  Court  of  Ap- 
peals against  very  similar  objections ;  and  that 
court  now  declared  that  railroads,  like  common 
highways,  were  public  in  character,  and  when  con- 
structed by  a  city  were  for  a  city  purpose.1 

1  Sun  Printing  and  Publishing  Association  vs.  the  Mayor,  etc., 
of  the  City  of  New  York,  152  N.Y.,  257  (March,  1897). 


MUNICIPAL   FRANCHISES   IN  NEW    YORK.     405 
Y.     THE   BROOKLYN    BRIDGES. 

A  bridge  over  the  East  River  is  said  to  have 
been  first  seriously  proposed  in  1811  ;  but  no  legal 
provision  was  made  for  such  a  structure  until  1867. 
In  that  year  the  New  York  Bridge  Company  was 
incorporated  by  Act  of  the  Legislature  ;  and  the  cit- 
ies of  New  York  and  Brooklyn  were  empowered  to 
subscribe  to  its  capital  stock  by  vote  of  two-thirds 
of  the  Council  in  either  case,  and  to  issue  bonds  in 
payment.  The  Act  also  authorized  the  two  cities 
or  either  of  them  to  purchase  the  bridge  at  any 
time  by  paying  the  cost  and  one-third  additional. 
Two  years  later,  both  municipalities  having  sub- 
scribed to  the  stock,  the  Mayor,  Comptroller,  and 
President  of  the  Board  of  Aldermen  in  New  York 
and  the  Commissioners  of  the  Sinking  Fund  in 
Brooklyn  were  made  directors  of  the  company, 
which  thus  became  almost  at  the  beginning  some- 
thing more  than  a  private  corporation.  In  1871 
and  the  following  year,  the  company  having  failed 
to  make  satisfactory  progress  with  the  bridge,  the 
two  cities  were  empowered  to  buy  out  the  private 
stockholders,  the  company  was  dissolved,  and  the 
bridge  was  declared  a  public  work.  The  expense 
of  construction  was  assumed  by  the  two  cities 
jointly,  Brooklyn  paying  two-thirds  of  the  amount ; 
and  the  management  of  the  bridge  was  turned  over 
to  eight  trustees  from  each  city,  together  with  the 


406  MUNICIPAL   MONOPOLIES. 

two  mayors  and  comptrollers  acting  as  trustees  ex 
officio.  This  Board  of  Trustees  was  empowered 
either  to  operate  a  railway  over  the  bridge  or  to 
delegate  its  operation  to  others,  and  chose  the 
former  alternative. 

When  the  bridge  was  opened  to  traffic  in  1883, 
there  was  a  charge  of  one  cent  for  admission  to  the 
promenade;  but  in  1885  this  was  reduced  to  one- 
fifth  of  a  cent  when  tickets  were  bought,  and  in 
1891  the  bridge  was  made  entirely  free  to  pedes- 
trians. After  the  first  year  and  a  half  the  tolls  for 
horses  and  vehicles  were  reduced  40  and  50  per 
cent ;  the  carriage-ways  were  made  free  to  bicycles 
in  1896  ;  and  the  following  year  the  Legislature 
authorized  the  abolition  of  all  carriage-way  tolls, 
which  would  have  left  no  tolls  whatever  except 
those  on  the  railway ;  but  this  authority  has  not 
been  exercised.  The  railway  fare  was  reduced  in 
1885  from  the  original  5  cents  to  3,  or  1\  when 
tickets  were  bought  in  packages  of  ten  ;  and  since 
1894  purchasers  of  only  two  tickets  at  a  time  have 
had  the  advantage  of  the  lowest  rate.  Thus  there 
has  been  a  consistent  policy  of  reduction  of  tolls, 
in  striking  contrast  with  the  maintenance  of  the 
original  fares  by  the  street  railwaj^s.  Notwith- 
standing these  successive  reductions,  or  rather 
partly  because  of  them,  the  annual  receipts  of  the 
bridge  from  tolls  of  all  kinds  gradually  increased 
from  about  half  a  million  dollars  the  first  year  or 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     407 

two  to  about  a  million  and  a  quarter.  The  total 
receipts  during  the  fiscal  year  1897  were  $1,363,- 
731,  including  $1,150,064  in  railway  fares, '$90,- 
797  in  carriage-way  tolls,  $87,039  in  rentals  from 
leased  arches  and  other  spaces,  and  $24,380  for  the 
use  of  the  bridge  as  a  support  for  telegraph  and 
telephone  wires.  After  paying  all  expenses,  includ- 
ing many  items  more  properly  chargeable  to  capi- 
tal account,  there  has  frequently  been  a  so-called 
surplus  equal  to  3  per  cent  or  more  of  the  original 
cost  of  more  than  $16,000,000,  to  be  paid  into  the 
sinking-funds  of  the  two  cities,  —  two-thirds  to 
Brooklyn  and  one-third  to  New  York.  This  surplus 
revenue  was  $540,000  in  1894,  and  $510,000  in 
1895,  but  fell  to  $210,000  in  1896  ;  no  surplus 
was  divided  during  the  fiscal  year  1897,  but  the 
receipts  exceeded  the  expenditures  by  $135,588. 

When  the  railway  fare  was  cut  in  two  in  1885 
the  traffic  at  once  more  than  doubled ;  and  the 
receipts,  instead  of  falling  off,  were  considerably 
increased.1  What  is  more  surprising,  there  was  at 
the  same  time  no  increase  in  operating  expenses  of 
the  bridge  as  a  whole,  but  a  slight  decrease.  The 
operating  expenses  of  the  railway  itself  are  not 
separately  reported,  but  they  undoubtedly  com- 
prise all  the  large  items. 

The  management  of  the  bridge  and  the  bridge 
railway,  as  compared  with  that  of  the  elevated  and 

1  Report  of  the  Trustees,  1885,  pp.  4-10. 


408  MUNICIPAL    MONOPOLIES. 

surface  roads  in  the  two  cities,  has  heen  on  the 
whole  remarkably  good.  The  trustees  have  been 
subjected  to  much  newspaper  criticism,  especially 
in  eonnection  with  some  temporary  inconvenience 
attending  the  recent  improvement  of  terminal  fa- 
cilities ;  but  this  seems  to  be  only  an  illustration 
of  the  principle  that  public  corporations  are  more 
closely  watched  than  private  ones,  and  so  is  rather 
an  argument  for  than  against  municipal  manage- 
ment. In  the  fourteen  years  during  which  the 
bridge  railway  has  been  in  operation,  often  in  the 
midst  of  dense  fogs,  there  has  been  only  one  fatal 
accident;  but  it  is  noticeable  that  whenever  a 
break-down  occurs  it  occasions  much  more  remark 
than  a  similar  mishap  on  the  elevated  railway. 
The  work  of  the  bridge  trustees  has  been  on  the 
whole  rather  a  triumph  for  municipal  operation 
and  low  charges. 

One  great  inconvenience  of  the  bridge  railway  in 
the  past,  though  borne  with  little  complaint  by  the 
public,  has  been  the  necessity  of  changing  cars  at 
both  ends  for  destinations  at  any  distance  from  the 
bridge.  This  has  now  been  obviated  in  large  meas- 
ure by  terminal  facilities  permitting  the  Brooklyn 
surface  and  elevated  railways  to  run  their  cars  over 
the  bridge.  They  are  not  permitted  to  collect  any 
additional  fare  ;  and  in  consideration  of  this  condi- 
tion the  compensation  for  the  use  of  the  bridge  and 
tracks  has  been  fixed  at  the  very  low  rate  of  12i 


MUNICIPAL  FRANCHISES  IN  NEW   YORK.     409 

cents  for  each  elevated  railway  car  and  5  cents  for 
each  surface  car,  —  a  needlessly  great  sacrifice  of 
revenue,  it  would  seem,  however  desirable  the  in- 
novation. This  improvement  has  been  carried  to 
comjDletion  not  by  the  Trustees  of  the  New  York 
and  Brooklyn  Bridge,  who  began  it,  but  under  the 
auspices  of  the  Department  of  Bridges  of  the  City 
of  New  York ;  for  with  the  union  of  the  cities  the 
joint  board  of  trustees  has  ceased  to  exist,  and  its 
powers  are  vested  in  the  Commissioner  of  Bridges 
and  in  the  Municipal  Assembly. 

The  preliminary  history  of  the  second  East  River 
Bridge,  which  is  to  connect  Grand  Street  in  Man- 
hattan with  Broadway  in  Brooklyn,  is  similar  in 
its  main  outlines  to  that  of  the  original  Brooklyn 
Bridge.  At  first  the  franchise  was  granted  to  the 
East  River  Bridge  Company;  but  after  this  com- 
pany had  exceeded  the  time  allowed  it  for  begin- 
ning wrork,  its  rights  were  purchased  on  behalf  of 
the  two  cities  by  the  East  River  Bridge  Commis- 
sioners, appointed  under  an  Act  of  1895,  who  have 
begun  the  construction  of  the  piers.  The  manage- 
ment of  the  bridge  when  completed  was  to  have 
been  turned  over  to  the  trustees  of  the  first  Brook- 
lyn Bridge,  but  in  1896  its  future  management  was 
intrusted  to  the  Commissioners  in  charge  of  its 
construction  ;  and  the  new  charter  makes  an  ex- 
ception in  their  favor  and  leaves  their  powers  un- 
diminished.    The  proposed  bridge  across  the  North 


410  MUNICIPAL  MONOPOLIES. 

River  is  to  be  the  property  of  a  private  corporation, 
unless,  indeed,  the  history  of  the  Brooklyn  bridges 
again  repeats  itself.  Various  tunnels  between 
Brooklyn,  Manhattan,  and  Jersey  City  are  also  pro- 
jected by  more  or  less  substantial  corporations,  one 
of  which  has  even  carried  its  excavations  most  of 
the  necessary  distance  under  the  North  River,  but 
lacks  the  capital  necessary  to  finish  it. 

VI.    WATER,  GAS,  AND  ELECTRICITY. 

The  excellent  water  supply  of  the  lesser  New 
York  City  was  under  the  management  of  the  De- 
partment of  Public  Works ;  the  new  charter  cre- 
ates a  Department  of  Water  Supply,  with  a 
Commissioner  at  its  head.  The  Croton  Aqueduct 
Commission,  which  still  controls  the  aqueduct, 
will  go  out  of  existence  at  the  end  of  the  century. 
Although  the  expense  of  aqueduct  construction 
was  very  great,  the  net  revenue  from  the  water 
service  is  much  more  than  sufficient  to  pay  the 
interest  on  the  bonds,  and  the  debt  is  gradually 
disappearing.1  The  charges  for  water,  locally 
known  as  "  water  rents,"  together  with  fees  for 
tapping  mains,  amounted  in  1896  to  $4,144,057. 
Commissioner  Collis,  in  the  report  of  his  depart- 
ment for  that  year,  described  the  situation  as 
follows :  — 

1  Qf.  Durand,  "  Finances  of  New  York  City,"  p.  226. 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     411 

"  For  the  first  time  in  the  history  of  the  city  the  revenue 
carefully  collected  from  water  rents  is  more  than  enough  to 
reimburse  the  entire  outlay  of  the  Public  Works  Depart- 
ment which  is  taken  from  taxation ;  that  is  to  say,  our 
water  rents  pay  for  repairs  to  pavements,  street  lighting, 
care  and  repairs  of  the  entire  water  system,  care  and  repairs 
of  public  buildings,  all  salaries  and  wages,  and  all  other 
administrative  expenditure ;  and  all  this  in  the  face  of  the 
fact  that  our  people  consume  110  gallons  per  capita  per  day, 
whereas  in  London  they  are  limited  to  25  gallons  per  day." 

The  receipts  for  1897  were  $4,322,226.  The 
running  expenses  are  difficult  to  ascertain  accu- 
rately, but  are  estimated  in  round  numbers  at 
$1,000,000  a  year.  Allowance  should  be  made 
for  the  fact  that  charitable  institutions  are  sup- 
plied with  water  free  of  charge,  to  say  nothing  of 
that  used  by  the  various  city  departments. 

Whatever  measure  of  success  the  city  has  had 
with  its  transit  problem  and  its  municipal  under- 
takings, it  has  been  much  less  fortunate  in  dealing 
with  its  lighting  monopolies.  The  gas  companies 
have  usually  obtained  their  franchises  for  the  ask- 
ing, and  practically  no  revenue  has  been  derived 
from  this  source.  Nor  is  there  any  very  satisfac- 
tory regulation  of  the  companies,  though  public 
inspection  of  meters  is  provided  for  at  their  ex- 
pense. For  the  rest,  the  Legislature  has  clung 
persistently  to  its  belief  in  competition  as  a  regu- 
lator, and  has  been  reluctant  even  to  reduce  the 


412  MUNICIPAL   MONOPOLIES. 

price  of  gas.  This  attitude  was  strikingly  shown 
in  1886,  two  years  after  the  formation  of  the  Con- 
solidated Gas  Company  with  great  watering  of 
stock,  by  the  passage  of  "  an  Act  to  facilitate  the 
supply  of  illuminating  gas  in  the  city  of  New 
York  at  a  reasonable  price,"  which  simply  incor- 
porated the  Standard  Gas  Light  Company,  author- 
ized it  to  \&y  pipes  under  all  the  streets  of  the 
city  and  charge  $1.50  a  thousand  feet  for  gas, 
and  forbade  it  to  unite  or  pool  receipts  or  earnings 
with  any  other  gas  company.  The  prevailing 
price  at  this  time  was  $1.75;  but  another  Act  of 
the  same  year  reduced  it  to  $1.25  for  all  compa- 
nies, legislative  investigation  having  shown  that 
the  profits  of  the  business  were  excessive  ; 1  while 
a  third  Act  applied  the  prohibition  of  combinations 
and  agreements  to  all  companies  thereafter  organ- 
ized, and  limited  their  dividends  to  10  per  cent  of 
the  capital  actually  paid  in,  but,  following  the 
English  plan,  allowed  an  additional  1  per  cent  for 
every  5-cent  reduction  of  the  price  below  $1.25. 
Consolidation  had  been  forbidden  in  1866  in  the 
case  of  the  Mutual  Gas  Light  Company,  and  made 
a  misdemeanor  on  the  part  of  the  directors.  The 
mutual  feature  of  this  charter  provided  that  when 
the  profits  should  exceed  10  per  cent  one-half  the 
excess  should  be  divided  among  the  consumers  in 

1  Senate  Document  No.  41,  1S85.  quoted  at  length  by  Bemis, 
"  Municipal  Ownership  of  Gas  in  the  United  States,"  pp.  70-7(1. 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.     413 

proportion  to  the  amount  consumed,  and  one-half 
distributed  as  dividends  among  the  stockholders 
who  were  also  consumers ;  but  the  dividends  are 
easily  kept  below  10  per  cent. 

For  eleven  years  the  price  of  gas  was  maintained 
at  $1.25,  with  the  result  that  in  New  York  the 
use  of  gas  for  fuel  is  still  considered  an  expensive 
luxur}^.  In  1897  a  bill  to  reduce  the  price  to  $1 
was  introduced  and  pushed  vigorously  in  the  Legis- 
lature, but  the  companies  were  able  to  secure  the 
substitution  of  a  measure  reducing  the  price  only 
5  cents  at  first,  with  a  further  reduction  of  5 
cents  a  year  for  four  years.  The  yearly  contract 
prices  for  public  street-lighting  range  from  $12  to 
$28  a  lamp  for  three-foot  burners,  averaging  more 
than  the  $15  paid  the  Manhattan  Gas  Light  Com- 
pany in  1833  for  burners  of  the  same  size.  When 
gas  was  first  introduced  in  1823,  the  New  York 
Gas  Light  Company  was  required  to  light  the 
streets  at  an  expense  to  the  city  not  exceeding  that 
of  an  equal  number  of  oil  lamps.  The  gas  fran- 
chises of  this  early  period  were  granted  for  terms 
of  from  fifteen  to  thirty  years,  but  this  prudent 
custom  soon  fell  into  disuse.  The  period  for  which 
a  gas  company  may  be  incorporated  is  limited  to 
fifty  years;  but  according  to  the  decision  in  the 
Broadway  Surface  Railroad  case,1  this  does  not 
necessarily  limit  the  franchise  given  by  the  city. 
>  People  vs.  O'Brien,  111  N.Y.,  1. 


414  MUNICIPAL   MONOPOLIES. 

Some  small  amounts  have  been  received  in  recent 
years  from  the  Equitable  Gas  Light  Company,  by 
reason  of  a  provision  of  its  franchise  which  re- 
quired it  to  pay  20  cents  for  each  foot  of  main 
laid.  The  East  River  Gas  Company  of  Long 
Island  City,  which  has  recently  begun  to  supply 
gas  to  Manhattan  through  mains  under  the  river, 
is  required  to  pay  3  per  cent  of  its  gross  receipts 
from  this  source.  In  1897  this  company  paid 
$21,739,  and  the  Equitable  $1,634.  The  gas 
companies  are  taxed  in  the  same  manner  as  street 
railways,  except  that  the  tax  on  gross  earnings  is 
only  one-half  as  great. 

What  has  been  said  of  the  gas  companies  applies 
also,  as  far  as  the  treasury  is  concerned,  to  electric 
lighting  companies  and  other  corporations  using 
electricity.  The  regulation  of  these  companies, 
however,  requires  separate  mention,  being  chiefly 
concerned  thus  far  with  placing  the  wires  under- 
ground, and  diminishing  as  far  as  possible  the 
danger  from  those  remaining  above  the  surface. 
An  act  of  1884  ordered  all  telegraph,  telephone, 
and  electric-light  wires  placed  underground;  and 
the  next  year  the  administration  of  the  law  was 
intrusted  to  a  Board  of  Commissioners  of  Electri- 
cal Subways,  which  was  afterward  designated  the 
Board  of  Electrical  Control  and  given  the  assis- 
tance of  the  Mayor  and  the  Commissioner  of  Pub- 
lic Works.     The  companies  affected  first  ignored 


MUNICIPAL  FRANCHISES  IN  NEW   YORK.     415 

the  law  and  then  applied  to  the  courts  for  relief, 
declaring  the  operation  of  their  wires  underground 
to  be  an  utter  impossibility ;  but  the  courts  finally 
refused  to  grant  the  desired  immunity.  The  sub- 
ways have  been  constructed  under  the  direction  of 
the  Board  of  Electrical  Control  by  two  companies, 
which  are  required  to  rent  space  on  equal  terms 
to  all  authorized  parties  applying  therefor,  and  to 
pay  into  the  city  treasury  any  excess  of  average 
profits  above  10  per  cent ;  but  the  Commissioners 
of  the  Sinking  Fund  have  discretionary  power  to 
purchase  the  subways  at  such  price  as  may  be 
agreed  upon,  not  exceeding  ten  per  cent  more 
than  the  cost  of  construction.  The  Board  of  Elec- 
trical Control  was  a  temporary  body,  whose  work  is 
now  finished ;  and  its  functions,  with  those  of  the 
Brooklyn  Commissioners  of  Electrical  Subways, 
are  devolved  upon  the  Commissioner  of  Public 
Buildings,  Lighting  and   Supplies. 

VII.     CONCLUSION. 

In  the  city's  dealings  with  the  ferry  companies 
several  important  principles  have  been  evolved, 
chief  among  which  are  the  sale  of  franchises  for 
short  terms  to  the  highest  bidders,  the  fixing  of 
upset  prices  according  to  the  value  of  each  fran- 
chise, the  acquisition  of  the  necessary  property  by 
new  lessees  at  appraised-  valuations,  the  exercise 


416  MUNICIPAL  MONOPOLIES. 

by  the  Legislature  of  the  right  to  reduce  fares,  and 
the  reservation  by  the  city  of  minute  powers  of 
regulation.  The  auction  principle  has  been  ap- 
plied to  street  railways  only  in  a  very  imperfect 
manner,  and  without  limit  as  to  the  duration  of 
franchises.  By  the  charter  of  Greater  New  York, 
however,  the  situation  as  to  street  railways  is  ex- 
actly reversed ;  for  while  the  provision  requiring 
auction  sales  seems  to  be  repealed,  it  is  provided 
that  "  no  franchise  or  right  to  use  the  streets,  ave- 
nues, parkways  or  highways  of  the  city  shall  be 
granted  .  .  .  for  a  longer  period  than  twenty-five 
years,"  though  any  such  grant  may  provide  for  re- 
newals at  fair  revaluations,  not  exceeding  twenty- 
five  years  in  the  aggregate.  At  the  expiration  of 
a  franchise  the  plant  is  to  become  the  property  of 
the  city,  either  without  compensation  or  at  a  fair 
valuation  of  the  tangible  property,  as  may  be  pro- 
vided in  the  original  grant.  When  the  city  ac- 
quires a  plant  without  compensation  it  may  either 
operate  it  or  lease  it  for  not  more  than  twenty 
years  to  the  former  grantee  or  others ;  but,  curi- 
ously enough,  if  the  city  pays  for  the  plant,  it 
must  itself  operate  it  for  at  least  five  years,  after 
which  it  may  determine  either  to  continue  muni- 
cipal operation  or  to  lease  the  property  for  limited 
periods  as  it  does  ferries  and  docks.  It  is  also 
provided  that  every  grant  shall  make  adequate  pro- 
vision for  efficient  service  at  reasonable  rates,  and 


MUNICIPAL   FRANCHISES  IN  NEW   YORK.      417 

for  the  maintenance  of  the  property  in  good  con- 
dition. All  franchises,  including  extensions  and 
renewals,  are  to  be  granted  by  ordinance  after  due 
publication  of  all  the  terms  and  conditions,  includ- 
ing the  rates  of  fare  or  other  charges  ;  and  at  least 
thirty  days  must  intervene  between  the  introduc- 
tion and  final  passage  of  such  ordinances.  The 
plan  of  public  sale  of  franchises  is  replaced  by  the 
requirement  that  no  franchise  shall  be  granted  ex- 
cept on  terms  approved  by  the  Board  of  Estimate 
and  Apportionment,  after  an  inquiry  into  the  value 
of  the  franchise  and  the  adequacy  of  the  proposed 
compensation.  Every  ordinance  granting  a  fran- 
chise must  receive  the  votes  of  three-fourths  of  all 
the  members  elected  to  each  branch  of  the  Muni- 
cipal Assembly,  or  five-sixths  in  case  of  a  veto  by 
the  Mayor. 

The  requirement  of  these  extraordinary  majori- 
ties is  an  interesting  experiment,  but  it  would  not 
have  been  sufficient  to  prevent  the  Broadway  fran- 
chise steal.  A  rather  more  valuable  provision,  if 
one  may  judge  of  the  future  by  the  past,  is  that  giv- 
ing to  the  Board  of  Estimate  and  Apportionment 
the  duty  of  investigation  and  the  power  of  abso- 
lute veto  ;  for  this  definitely  fixes  the  responsibility 
upon  five  men.  This  particular  board  was  chosen 
for  the  purpose  doubtless  because  it  is  the  body 
charged  with  making  both  ends  meet  in  the  muni- 
cipal economy,  and  so  may  naturally  be  expected 


418  MUNICIPAL   MONOPOLIES. 

to  have  a  particular  interest  in  obtaining  the  great- 
est possible  financial  return  for  every  franchise. 
On  the  other  hand,  this  board  has  no  especial  in- 
terest in  securing  reductions  of  fares  or  other 
charges  except  to  the  extent  that  they  would  in- 
crease instead  of  diminishing  the  receipts  upon 
which  percentages  are  paid.  While  the  Board  of 
Estimate  and  Apportionment  may  usually  be 
trusted  to  look  out  fairly  well  for  the  fiscal  inter- 
ests of  the  city  and  the  relief  of  the  taxpayers,  the 
multitudes  who  pay  tribute  to  the  franchise-hold- 
ing corporations  must  look  for  relief  mainly  to 
the  Municipal  Assembly,  which,  if  un corrupt  and 
fairly  representative,  will  have  a  natural  tendency 
to  reduce  the  charges  whenever  it  may  justly  be 
done. 

One  great  defect  in  this  new  procedure  is  that 
without  the  expedient  of  the  competitive  sale  the 
Board  of  Estimate  and  Apportionment  has  no 
means  of  determining  the  value  of  a  given  fran- 
chise, which  depends  upon  a  great  variety  of  cir- 
cumstances. The  charter  fails  to  prescribe  the 
mode  in  which  the  board  is  to  conduct  its  in- 
quiries. When  the  franchise  in  question  is  a 
renewal  of  a  previous  grant,  and  the  charges  and 
other  conditions  are  to  remain  the  same  as  before, 
its  value  may  be  ascertained  with  some  degree  of 
accuracy  by  examining  the  accounts  of  the  com- 
pany whose  grant  is  expiring,  as  the  Comptroller 


MUNICIPAL  FRANCHISES  IN  NEW   YORE.     419 

has  authority  to  do ;  but  it  is  not  always  possible 
to  ascertain  the  value  of  the  grant  in  this  manner, 
and  in  the  case  of  a  new  franchise  or  a  renewal 
under  greatly  changed  conditions,  this  recourse  is 
lacking  altogether.  No  one  can  tell  the  value  of 
a  new  franchise  so  well  as  those  who  apply  for  it ; 
and  it  is  only  when  they  are  bidding  against  each 
other  that  they  will  disclose  their  real  opinions  on 
the  subject.  The  most  obvious  plan,  therefore,  if 
the  board  really  wishes  to  secure  the  best  possible 
terms  for  the  city,  is  to  depend  in  large  part  upon 
the  offers  of  rival  companies  to  indicate  the  value 
of  new  franchises ;  and  these  offers  might  even  be 
received  at  public  hearings  which  would  really  be 
auction  sales  in  everything  but  name,  for  there  is 
nothing  in  the  charter  to  prevent  the  holding  of 
such  informal  auctions.  It  must  of  course  be  re- 
membered that  competition  of  this  kind  is  not 
effective  in  all  cases.  So  long  as  the  Board  of 
Estimate  and  Apportionment  is  incorruptible  and 
vigilant  in  the  public  interest,  there  is  no  reason 
why  the  provisions  of  the  new  charter  should  not 
work  well ;  their  chief  fault  is  that  there  is  noth- 
ing to  prevent  a  weak  or  dishonest  city  govern- 
ment from  giving  away  franchises  almost  as  freely 
as  ever.  The  provision  of  the  General  Railroad 
Law  requiring  street  railways  to  pay  at  least  three 
per  cent  of  their  receipts,  and  five  per  cent  after 
the  first  five  years,  still  remains  in  force ;  but  there 


420  MUNICIPAL  MONOPOLIES. 

is  no  corresponding  requirement  concerning  other 
classes  of  corporations. 

Whether  the  precautions  now  thrown  about  the 
granting  of  franchises  are  more  or  less  effective 
than  the  provisions  of  the  Cantor  Act,  the  general 
limitation  of  the  franchise  period  to  twenty-five 
years  marks  a  great  advance  ;  for  now  if  valuable 
franchises  are  granted  for  nothing,  or  for  the  least 
compensation  allowed  by  law,  the  evil  will  not 
always  be  irreparable ;  no  city  government,  how- 
ever weak  or  corrupt,  can  make  its  grants  binding 
upon  future  generations.  So  as  between  the  old 
plan  of  granting  perpetual  franchises,  even  at  auc- 
tion, and  the  new  plan  of  granting  them  for  lim- 
ited periods,  without  express  provision  for  compe- 
tition, the  new  plan  will  be  the  better  in  the  long 
run.  For  at  some  future  time,  when  the  people 
shall  have  triumphed  in  their  revolt  against  the 
bosses,  as  soon,  in  short,  as  the  people  become 
thoroughly  tired  of  being  robbed,  the  prices  of 
franchises  will  begin  to  approximate  their  actual 
value ;  and  none  granted  under  the  new  charter 
will  escape  revaluation.  At  first  thought  the  re- 
strictions of  the  new  charter  seem  much  like  lock- 
ing the  stable  door  after  the  horse  is  stolen ;  yet, 
even  though  so  much  has  been  disposed  of  already, 
there  is  really  much  remaining  to  excite  the  ambi- 
tions of  promoters  in  the  future.  As  electricity 
replaces  the  more  primitive  sources  of  light,  heat, 


MUNICIPAL  FRANCHISES  IN  NEW   YORK.     421 

and  power,  there  will  be  need  for  more  electrical 
conduits,  and  those  already  laid  will  yield  such 
profits  that  the  city  may  begin  to  get  its  share ;  or 
if  compressed  air  should  turn  out  to  be  the  marvel 
of  the  twentieth  century,  the  demand  for  air-tubes 
under  the  pavements  would  be  vastly  increased. 
Already  there  are  eager  applicants  for  the  privi- 
lege of  supplying  fuel-gas  to  the  housekeepers  of 
Greater  New  York ;  for  the  older  and  lesser  New 
York,  thanks  to  dollar-and-a-quarter  gas,  has  been 
so  behind  the  times  as  scarcely  to  know  any  better 
fuel  than  coal.  Again,  the  modernization  of  the 
surface  railways  is  in  progress  in  Manhattan ;  and 
as  Mr.  Low  pointed  out  in  accepting  the  nomina- 
tion for  Ma}ror,  every  consent  to  a  change  of  power 
should  be  treated  as  a  new  franchise.  There  is 
some  danger  that  the  people  of  this  old-fashioned 
borough,  whose  only  choice  in  the  past  has  been 
between  the  plodding  horse-cars,  the  inconvenient 
and  overcrowded  "  L,"  and  the  jerky  cable,  will 
welcome  the  smoothly-running  "underground  trol- 
ley "  with  such  delight  that  they  will  overlook  its 
advantages  from  the  company's  standpoint.  It  is 
indeed  the  most  nearly  perfect  system  of  surface 
traction  in  use ;  but  it  is  also  an  economical  sys- 
tem—  very  economical  as  compared  with  horses  — 
and  its  introduction  might  well  be  taken  advantage 
of  to  undo  in  some  measure  the  mistakes  of  the 
past.    Thus  might  the  march  of  invention  be  made 


422  MUNICIPAL  MONOPOLIES. 

to  aid  the  growth  of  population  in  increasing  the 
rentals  of  the  surface  as  well  as  the  subways  of 
the  city  streets. 

In  conclusion,  it  may  be  said  that  the  public 
nature  of  transit  monopolies  has  been  fairly  well  rec- 
ognized by  the  statute  laws  of  New  York,  not  only 
in  permitting  municipal  construction  of  the  East 
River  bridges  and  the  Rapid  Transit  Railway  after 
unsuccessful  attempts  to  get  them  built  by  pri- 
vate enterprise,  but  by  the  public  sale  of  franchises, 
by  the  appointment  of  commissioners  to  adopt 
plans  for  new  modes  of  transit,  by  giving  to  Su- 
preme Court  commissioners  power  to  override  the 
wishes  of  property-owners  in  the  public  interest, 
and  by  the  supervisory  powers  of  the  State  Rail- 
road Commission  and  various  municipal  authori- 
ties. But  the  principles  which  made  the  old  New 
York  more  successful  than  most  American  cities 
in  dealing  with  transit  franchises  were  never  ap- 
plied to  gas  or  electric  monopolies  until  the  char- 
ter of  the  greater  city  was  adopted.  In  respect  to 
the  manner  of  granting  franchises,  all  classes  of 
corporations  hereafter  applying  for  the  use  of  the 
streets  are  placed  on  an  equal  footing  by  this  in- 
strument, in  which  "  the  rights  of  the  city  in  and 
to  its  water  front,  ferries,  wharf  property,  land 
under  water,  public  buildings,  wharves,  docks, 
streets,  avenues,  parks,  and  all  other  public  places 
are  .   .  .  declared  to  be  inalienable." 


VI. 

THE   LEGAL  ASPECTS   OF 

MONOPOLY. 


THE   LEGAL  ASPECTS   OF 
MONOPOLY. 

By  Professor  FRANK  PARSONS. 


In  dealing  with  the  public  ownership  or  control 
of  roads,  bridges,  and  canals,  parks,  ferries,  and 
wharves,  water,  gas,  and  electric  plants,  street  rail- 
ways, telegraph  and  telephone  systems,  etc.,  etc., 
various  questions  of  law  arise,  a  definite  compre- 
hension of  which  is  necessary  to  a  clear  under- 
standing of  the  relations  of  the  public  to  business 
enterprises.  Some  of  the  principal  subjects  under 
this  head  are  as  follows  :  — 

1.  The  right  of  cities  and  towns  to  engage  in 
business. 

2.  The  right  of  the  public  to  enter  into  compe- 
tition with  private  enterprise. 

3.  The  right  of  the  public  to  take  private  prop- 
erty, and  the  compensation  that  must  be  paid. 

4.  The  right  of  the  public  to  prevent  the  use  of 
injurious  methods  in  business. 

5.  The  right  of  the  public  to  regulate  rates  and 
service  in  lines  of  business  affected  with  a  public 
interest. 

425 


426  MUNICIPAL  MONOPOLIES. 


I.     AUTHORITY. 

The  Hight  of  Cities  and  Towns  to  Engage  in 
Business. 

In  order  to  determine  whether  a  city  or  town 
has  the  legal  right  to  engage  in  a  specified  busi- 
ness two  questions  must  be  answered :  (a),  Is  the 
purpose  a  public  one  ?  and  (6),  Has  the  Legislature 
or  the  Constitution  authorized  such  action  on  the 
part  of  the  municipality  ? 

(a)  The  first  question  is  a  judicial  one.  The 
fundamental  principles  of  justice  inherent  in  the 
very  nature  of  free  government,  whether  expressed 
in  its  Constitution  or  not,  forbid  taxation  for  pri- 
vate purposes.  A  government  enterprise  requires 
or  may  require  taxation ;  wherefore  government 
enterprise  must  relate  to  a  public  purpose.1 

The  government  cannot  take  the  property  of  A 
in  order  to  make  it  a  gift  to  B,  nor  engage  in  busi- 
ness for  the  service  of  one  or  two  individuals  or  a 
small  class  of  individuals.2  The  government  is  an 
agent  of  the  public,  and  must  not  use  its  power  and 
machinery  for  the  benefit  of  any  other  principal. 

1  Loan  Association  vs.  Topeka,  20  Wallace,  664  U.  S.  Supreme 
Court;  Weismer  vs.  Douglas,  6*4  N.  Y.,  92,  98-99;  Opinion  of  Jus- 
tices, 58  Me.,  590.     Judge  Cooley  on  Taxation,  p.  116. 

2  Judge  Dillon  in  Hanson  vs.  Vernon,  27  la.,  at  51 ;  see  also  25 
la.,  540;  164  U.  S.,  403;  Cooley  on  Taxation,  chap,  iv.;  Parsons's 
"Blackwell,"  §§  33,  35;  Sedgwick  on  "Constitutional  Law,"  155. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     427 

It  has  been  held  that  roads,  bridges,  sidewalks, 
sewers,  ferries,  markets,  scales,  wharves,  canals, 
parks,  baths,  schools,  libraries,  museums,  hospitals, 
lodging-houses,  poor-houses,  jails,  cemeteries,  pre- 
vention of  fire,  supply  of  water,  gas,  electricity, 
heat,  power,  transportation,  telegraph  and  tele- 
phone service,  clocks,  skating-rinks,  musical  en- 
tertainments, exhibitions  of  fireworks,  tobacco 
warehouses,  employment  offices,  etc.,  are  public 
purposes,  and  proper  subjects  of  governmental 
ownership.1 

On  running  through  the  cases  to  find,  if  pos- 
sible, a  common  ground  of  decision,  it  appears 
that  whatever  is  of  general  utility  or  convenience 
to  the  community  constitutes  a  public  purpose. 
There  is  an  opinion  by  a  Massachusetts  court2  in 
which  the  majority  of  the  court  affirm  that  the 
sale  of  coal  and  wood  is  not  a  public  purpose,  and 
that  cities  and  towns  cannot  be  authorized  by  the 
Legislature  to  open  municipal  fuel-j^ards.  The 
court  said  that  constitutional  questions,  such  as 


1  See  Cooley  on  Taxation  and  cases  cited.  A  municipality 
may  be  authorized  to  build  and  own  a  street  railway ;  such  rail- 
way serves  a  public  purpose.  Sun  Printing  and  Pub.  Assoc,  vs. 
New  York,  46  N.  E.  Rep.,  499,  April  9,  1897.  Cities  and  towns 
may  be  authorized  to  establish  and  operate  gas  and  electric  light 
works,  New  Orleans  Gas  Light  Co.  vs.  La.  Light  Co.,  115  U.  S., 
659,  670,  683.  Opinions  of  Justices,  150  Mass.,  592.  Citizens'  Gas 
Light  Co.  vs.  Wakefield,  161  Mass.,  432.  Crescent  City  Gas  Light 
Co.  vs.  New  Orleans  Gas  Light  Co.,  27  La.  An.,  138, 147. 

2  Opinion  of  Justices,  155  Mass.,  601. 


428  MUNICIPAL   MONOPOLIES. 

this  one,  of  the  nature  of  a  public  purpose,  were 
largely  questions  of  history  and  usage ;  and  it  had 
not  been  usual  for  cities  and  towns  to  supply  their 
inhabitants  with  fuel  unless  they  were  paupers, 
nor  to  engage  in  anything  of  the  nature  of  what 
is  commonly  called  trade  or  commercial  business. 
"  We  know  of  no  instance  of  this  being  done," 
says  the  court,  "except  by  the  town  of  Boston." 
In  1713  and  1714  Boston,  fearing  a  scarcity  of 
food,  voted  to  lay  in  a  stock  of  grain  to  the 
amount  of  5,000  bushels  of  corn.  Afterward  the 
town  regularly  bought  and  stored  grain,  and  sold 
it  to  the  inhabitants  every  year  until  1775,  and 
perhaps  later.  The  court  remarked  that  the  near- 
est analogy  was  the  manufacture  and  sale  of  gas 
and  electric  light,  and  that  the  decision  in  that  case 
rested  on  the  ground  of  the  general  convenience  of 
the  service,  the  impracticability  of  each  individual's 
rendering  the  service  for  himself,  and  the  necessity 
of  using  the  streets  in  a  special  way,  or  exercising 
the  rights  of  eminent  domain;  whereas  the  buying 
and  selling  of  coal  and  wood  does  not  require  a 
special  use  of  the  streets,  nor  the  right  of  eminent 
domain,  nor  the  exercise  of  any  other  franchise  or 
authority  derived  from  the  Legislature. 

It  is  true  that  in  dealing  with  sewers,  water, 
gas,  and  electric  works,  etc.,  courts  have  sought  to 
strengthen  their  conclusions  by  reference  to  the 
necessity  of  a  special  use  of  the  streets  or  other 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     429 

action  requiring  legislative  authority;  but  they  did 
not  decide  that  a  purpose  could  not  be  a  public 
one  without  this  element :  on  the  contrary,  schools, 
libraries,  museums,  lodging-houses,  hospitals,  baths, 
scales,  markets,  etc.,  do  not  require  any  special 
use  of  the  streets  nor  any  franchise  or  right  of 
eminent  domain,  but  can  be  established  by  any 
one  without  legislative  authority.  As  to  imprac- 
ticability, it  is  as  impracticable  for  each  individ- 
ual to  establish  a  coal-yard,  and  get  coal  from  the 
mines  at  reasonable  rates,  as  it  would  be  for  each 
individual  to  supply  himself  with  schools,  libraries, 
baths,  hay-scales,  etc. 

The  real  gist  of  the  opinion  seems  to  reside  in 
the  following  sentences  :  — 

"  Buying  and  selling  coal  does  not  differ  essentially  from 
the  business  of  buying  and  selling  any  other  of  the  neces- 
saries of  life.  .  .  .  We  are  not  aware  of  any  necessity  why 
cities  and  towns  should  undertake  this  form  of  business 
any  more  than  many  others  which  have  always  been  con- 
ducted by  private  enterprise." 

The  court  considered  it  against  public  policy  to 
open  the  door  for  municipalities  to  engage  in  ordi- 
nary business  in  competition  with  private  parties. 
That,  however,  is  a  very  different  matter  from  the 
question  whether  or  not  the  purpose  is  a  public 
one.  The  two  questions  should  not  have  been 
confused  with  each  other.  If  the  purpose  is  a 
public  one,  the  question  whether  it  is  necessary 


430  MUNICIPAL  MONOPOLIES. 

or  wise  to  undertake  it,  is  a  question  for  each 
municipality  to  decide  for  itself,  and  is  a  matter 
entirely  outside  the  jurisdiction  of  the  court. 

In  a  strong  dissenting  opinion  Judge  Oliver 
Wendell  Holmes  says  :  — 

"  I  am  of  opinion  that  when  money  is  taken  to  enable  a 
public  body  to  offer  to  the  public  without  discrimination 
an  article  of  general  necessity,  the  purpose  is  no  less  public 
when  that  article  is  wood  or  coal  than  when  it  is  water  or 
gas  or  electricity  or  education,  to  say  nothing  of  cases  like 
the  support  of  paupers,  or  the  taking  of  land  for  railroads 
or  public  markets." 

(5)  Let  us  turn  now  to  the  second  question, 
the  legal  authority  of  the  municipality  to  engage 
in  any  given  business  or  undertaking. 

In  Germany  the  rule  is  that  municipalities  may 
establish  all  sorts  of  institutions  and  engage  in  all 
sorts  of  enterprises  that  can  further  the  material 
or  intellectual  welfare  of  their  citizens ;  and  in 
France  the  municipal  council  may  act  in  local 
affairs  without  state  approval,  except  where  this 
is  expressly  required  by  law.1  In  England  and 
the  United  States,  on  the  contrary,  a  municipality 
can  do  nothing  without  the  permission  of  the 
state.2 

1  Prof.  F.  J.  Goodnow,  in  Pubs,  of  Amer.  Econ.  Assoc,  vol. 
ii.,  p.  574. 

2  Dillon  on  Municipal  Corporations,  4th  Ed.,  §  89.  Parsons  on 
Municipal  Liberty,  Boston  Lav;  Magazine,  May,  1897.  There  is 
usually  in  municipal  charters  a  broad  power  to  make  "  police 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     431 

Iii  some  cases  authority  is  granted  by  constitu- 
tional provision.  For  example,  the  Kentucky  Con- 
stitution (1891)  provides  that  each  town  and  city 
shall  have  the  right  to  say  whether  or  not  a  street- 
railway,  gas,  water,  steam-heating,  telephone,  or 
electric-light  company  shall  build  in  its  streets,  the 
municipal  franchise  not  to  exceed  twenty  years,  and 
to  be  sold  to  the  highest  bidder.  The  Constitution 
of  South  Carolina  (1895)  prohibits  the  organiza- 
tion of  cities  or  towns  without  consent  of  the  citi- 
zens, and  provides  against  the  grant  of  any  right 
to  construct  or  operate  any  street-railway,  tele- 
graph, telephone,  water,  gas,  or  electric-light  plant 
without  consent  of  the  local  authorities.  More  or 
less  similar  provisions  are  found  in  the  constitu- 

regulations  "  or  to  act  for  the  "  safety,  order,  and  welfare  of  the 
community,"  or  "to  direct  and  manage  its  prudential  affairs; 
preserve  the  peace  and  good  order,  and  maintain  the  internal  po- 
lice thereof."  This  power  to  provide  for  the  comfort,  health,  con- 
venience, good  order,  and  general  welfare  of  the  people,  is  called 
the  "police  power"  (Dillon,  §  141),  and  from  it  municipalities 
may  derive  authority  to  establish  fire-departments,  suppress  nui- 
sances, build  and  control  markets,  construct  and  operate  water- 
works, light  the  streets,  etc.,  without  express  and  specific  legisla- 
tive action  on  these  special  matters.  (Dillon,  §§  143,  146, 380.)  The, 
general  tendency  of  the  courts,  however,  is  to  construe  municipal 
charters  strictly,  and  confine  them  to  such  powers  as  are  specifi- 
cally enumerated  or  necessarily  implied  or  clearly  established  by 
usage  as  fair  derivatives  from  the  general  clauses  (Dillon,  §§  30, 
89, 91, 92).  The  powers  conferred  on  a  municipal  corporation  may 
at  any  time  be  altered  or  repealed  by  the  Legislature,  either  by  a 
general  law,  or,  in  the  absence  of  constitutional  restriction,  by 
a  special  act.  (Dillon,  §  85;  102  U.  S.,  472;  74  N.Y.,  161;  106  111. 
237.) 


432  MUNICIPAL  MONOPOLIES. 

tions  of  several  other  States,  but  the  South  Carolina 
Charter  of  Liberty  contains  another  provision  that 
is  not  so  easy  to  parallel;  it  is  a  constitutional 
authority  for  any  city  or  town  to  build  or  buy 
water-works  or  lighting-plants,  and  supply  their 
inhabitants,  on  a  vote  of  the  people  to  that  effect. 

In  one  State  there  is  a  statute,  and  in  four  other 
States  there  are  constitutional  provisions,  confer- 
ring on  municipalities  the  right  of  making  their  own 
charters.1  This  makes  the  field  of  municipal  power 
about  the  same  as  under  the  German  rule,  as  a 
municipality  may  adopt  a  charter  that  will  give  it 
entire  freedom  of  action  so  long  as  it  does  not  do 
what  the  State  or  nation  has  forbidden. 

In  the  absence  of  constitutional  authority  a  mu- 
nicipality in  America  can  do  nothing  without  the 
permission  of  the  Legislature.  Cities  and  towns 
are  creatures  of  the  Legislature,  and  entirely  at  its 
mercy.     Even  the  powers  it  grants  them  may  be 

1  In  Missouri  cities  of  more  than  100,000  population  may  make 
their  own  charters.  In  Washington  cities  of  20,000  or  more ;  in 
California  cities  of  3,500  or  more ;  and  in  Minnesota  all  munici- 
palities may  do  this.  In  these  States  the  right  under  considera- 
tion is  secured  by  constitutional  provision.  The  first  provision 
of  this  sort  was  passed  by  Missouri  in  1875,  California  and  Wash- 
ington quickly  followed.  Minnesota  has  just  wheeled  into  line. 
St.  Louis,  Kansas  City,  San  Francisco,  Sacramento,  San  Diego, 
Los  Angeles,  Seattle,  Tacoma,  and  a  number  of  other  cities,  have 
availed  themselves  of  the  new  right.  By  a  Louisiana  statute  of 
189(5,  any  city  or  town  in  that  State  (except  New  Orleans)  may 
adopt  a  charter  of  its  own.  For  a  more  extended  treatment  of 
this  subject,  see  Parsons  on  "The  Rights  of  Cities,"  Equity 
Series,  No.  2,  C.  F.  Taylor,  Philadelphia. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     433 

revoked  at  any  time.  A  legislative  authority  to 
build  an  electric-light  plant,  for  example,  or  own 
and  operate  a  ferry,  gas-plant,  water-works,  rail- 
way system,  or  telephone  exchange  is  revocable  if 
the  grant  is  made  to  a  municipal  corporation,  but 
is  not  revocable  if  granted  to  a  private  corporation, 
unless  the  right  to  repeal  is  expressly  reserved.  A 
grant  to  an  association  of  citizens  called  a  company 
is  a  contract  protected  by  the  clause  of  the  Federal 
Constitution  which  forbids  a  State  to  pass  any  law 
impairing  the  obligation  of  contracts ;  but  a  grant 
of  the  very  same  nature  to  an  association  of  citizens 
called  a  city  is  not  a  contract,  and  is  not  protected 
by  the  National  Constitution.1  Why  it  is  not  a 
contract  is  simply  because  the  courts  have  so  de- 
cided in  order  to  carry  out  the  doctrine  that  muni- 
cipalities are  absolutely  subject  to  the  legislative 
will,2  a  doctrine  which  itself  rests  upon  a  confusion 
of  thought.  There  is  good  reason  for  holding 
municipalities  subject  to  the  Legislature  in  respect 
to  the  administration  of  justice,  arrest  of  criminals, 
proceedings  in  court,  election  regulations,  and  other 

1  East  Hartford  vs.  Hartford  Bridge  Co.,  10  How.  (U.  S.),  511 ; 
Roper  vs.  McWhorter,  77  Va.,  214:  compare  Benson  vs.  Mayor,  10 
Barb.,  223. 

'2  The  reason  sometimes  given  for  holding  a  municipal  charter 
not  to  be  a  contract  is  that  public  corporations  are  "created  by 
the  mere  will  of  the  Legislature,  there  being  no  other  party  inte- 
rested or  concerned  "  (Cooley  in  Const.  Liins.,  p.  336,  note ;  11  Ired., 
558,  5G1).  This  is  manifestly  false  ground,  since  the  citizens  of 
a  city  constitute  a  second  party  in  interest  quite  as  truly  as  the 
stockholders  of  a  private  corporation. 


434  MUNICIPAL  MONOPOLIES. 

matters  pertaining  to  political  and  governmental 
functions  in  respect  to  which  uniformity  is  desira- 
ble throughout  the  State  ;  but  there  is  no  reason  for 
compelling  a  city  or  town  to  consult  all  the  other 
cities  and  towns  in  the  State  in  order  to  find  out  if 
it  may  be  allowed  to  construct  a  local  gas-plant,  or 
water  system,  or  telephone  exchange.  State  inte- 
rests should  be  governed  by  the  State,  but  local 
business  should  be  controlled  by  the  municipality  ; 
at  least  it  should  be  so  if  the  principle  of  self-gov- 
ernment is  a  valid  one.  That  principle  requires 
that  each  individual  and  group  should  be  free  to 
govern  its  own  affairs  without  interference,  except 
so  far  as  the  government  of  large  interests  by  the 
large  groups  necessarily  interferes  with  the  govern- 
ment of  small  interests  in  the  included  groups. 
National  government  of  national  interests,  State 
government  of  State  interests,  municipal  govern- 
ment of  municipal  interests,  and  individual  gov- 
ernment of  individual  interests  —  that  is  the  law 
of  liberty  and  self-government;  and  it  affirms  that 
a  State  has  no  more  right  to  impose  its  judgment 
on  a  city  or  town  in  respect  to  its  local  business 
affairs  1  than  the  nation  has  to  impose  its  judgment 

1  There  is  a  clear  distinction  between  the  governmental  and  the 
business  functions  of  a  municipality.  In  respect  to  the  former,  it 
acts  as  an  agent  of  the  State.  In  respect  to  the  latter,  it  bears  the 
same  relation  to  the  State  as  a  private  corporation.  Its  water- 
works, parks,  markets,  hospitals,  libraries,  etc.,  it  holds  for  the 
benefit  of  its  citizens,  and  not  as  an  agent  of  the  State ;  and  the 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     435 

on  a  State  in  respect  to  State  affairs.  For  the 
most  part,  however,  this  line  of  reasoning,  clear  as 
it  is,  has  not  been  recognized  on  this  side  of  the 
water;  and  our  cities  are  subject  to  a  State  pater- 
nalism so  severe  that  a  city  of  half  a  million  people 
may  not  connect  two  public  buildings  with  an  elec- 
tric wire,1  except  by  legislative  permission ;  and 
it  is  even  lawful  for  the  Legislature  to  provide  for 
the  appointment  of  State  agents  to  take  the  man- 
agement of  municipal  business  entirely  out  of  the 
hands  of  the  municipality.2     It  is  lawful  also  for 

Legislature  cannot  take  away  this  tangible  property  without  com- 
pensation, although  it  may  annul  the  franchise  without  pay- 
ment, and  may  even  destroy  the  municipality  itself.  See  Mt. 
Hope  Cemetery  vs.  Boston,  158  Mass.,  509;  People  vs.  Ingersoll,  58 
N.Y.,  1 ;  Montpelier  vs.  East  Montpelier,  29  Vt.,  12. 

1  A  little  while  ago  the  city  of  Boston  wished  to  run  a  wire 
from  the  City  Hall  to  the  Old  Court  House,  either  over  or  under 
the  little  back  street  50  or  60  feet  wide  that  lies  between  the  two 
buildings.  The  object  was  to  enable  the  city  to  light  the  Old 
Court  House  from  the  dynamo  in  City  Hall.  A  bill  was  intro- 
duced for  the  purpose,  accompanied  by  petition  of  the  mayor  of 
Boston  (House  Bill  No.  747, 1898) ;  but  the  electric  companies  did 
not  wish  municipalities  to  use  a  dynamo  in  a  public  building  to 
operate  lights  outside  of  the  building,  and  the  Legislature  refused 
to  pass  the  bill,  and  Boston  cannot  run  a  wire  between  two  of  her 
own  buildings  over  or  under  her  own  street. 

2  In  1870  the  Pennsylvania  Legislature  appointed  a  commission 
to  erect  city  buildings  at  Broad  and  Market  Streets  in  Philadel- 
phia, and  required  the  city  to  pay  for  the  work,  although  she  had 
nothing  to.say  about  it.  (Perkins  vs.  Slack,  86  Pa.  St.,  283 ;  Dillon, 
§  74a;  Hare's  Am.  Const.  Law,  vol.  i.,  p.  630.)  Suppose  the  Legis- 
lature should  say,  "  Mr.  Jones,  you  are  able  to  build  a  marble  man- 
sion. We'll  have  it  built  for  you  to  suit  our  taste,  and  you  can 
pay  for  it."  The  courts  would  not  allow  such  imposition  on 
a  single  individual ;  but  a  million  individuals  in  the  shape  of  a 


436  MUNICIPAL  MONOPOLIES. 

the  Legislature  to  create  or  destroy  municipalities 
at  will.1 

The  weight  of  legal  authority  is  certainly  in 
favor  of  the  doctrine  of  almost  absolute  legislative 
power  over  municipalities.  Yet  the  argument  for 
local  self-government,  or  municipal  independence 
in  respect  to  local  affairs,  is  not  without  strong 
recognition  in  the  opinions  of  some  of  our  ablest 
judges.  Judge  Cooley  said  :  "  The  doctrine  that 
the  powers  and  rights  of  municipalities  are  wholly 
at  the  legislative  disposal  is  dangerous  in  govern- 
ment, and,  as  we  think,  unsound  in  constitutional 
law."2  And  the  Supreme  Court  of  Michigan 
held  that  the  Legislature  could  not  construct 
parks  for  the  city  of  Detroit  without  its  consent, 

municipality  are  helpless  against  the  Legislature,  because  of  the 
weight  of  some  old  ill-digested  precedents,  and  the  Pennsylvania 
Act  is  held  constitutional.  (See  Perkins  vs.  Slack,  supra.)  So  is 
an  Ohio  statute  authorizing  the  governor  to  appoint  officers  to  act 
on  boards  of  public  works  in  cities.  (State  vs.  Smith,  44  Ohio  St., 
348.)  The  water-works  of  a  city  may  be  taken  from  its  control,  and 
put  under  the  management  of  a  board  of  commissioners  appointed 
by  the  State.     (Coyle  vs.  Mclntire,  7  Houst  (Del.),  44.) 

There  is  authority  for  the  proposition  that  all  the  property  and 
all  the  rights  and  powers  of  a  municipality  are  at  the  absolute  dis- 
posal of  the  Legislature.     (Darlington  vs.  Mayor,  31  N.Y.,  164.) 

i  Meriwether  vs.  Garrett,  102  U..S.,  472,  511,  Dillon,  §§  54,  64, 
and  cases  cited.  Imagine  Congress  passing  an  Act  to  annex  Dela- 
ware and  Maryland  to  Pennsylvania,  or  divide  New  York  into 
three  or  four  States,  without  consulting  the  people  concerned. 
Yet  similar  things  may  be  done  by  a  legislature  with  cities  of 
more  importance  than  some  of  the  States.  Montpelier  vs.  East 
Montpelier,  29  Vt.,  12. 

2  Cooley  on  Taxation,  p.  687. 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     437 

nor  appoint  State  officers  to  control  a  city's  public 
works,  the  right  to  local  self-government  of  local 
affairs  being  inherent  in  the  American  system,  a 
part  of  the  fundamental  law  underlying  and  ante- 
dating our  constitutions,  and  existing  indepen- 
dently of  any  express  provision  on  the  subject.1 

Legislative  control  of  municipalities  has  been 
limited  in  a  number  of  States  by  constitutional  pro- 
visions forbidding  local  or  special  legislation  2  in 
reference  to  streets,  franchises,  granting  of  corpo- 
rate powers,  regulating  internal  municipal  affairs, 
creating,  amending,  or  repealing  municipal  char- 
ters, etc.  The  power  to  divide  cities  into  classes, 
and  legislate  for  each  class,  neutralizes  these  pro- 
visions to  a  considerable  extent,  and  the  range  of 
legislative  interference  with  the  internal  business 
of  municipalities  is  still  very  great. 

At  present  a  large  part  of  the  statutes  passed  by 
our  State  legislatures  each  year  consists  of  local 
laws  dealing  with  matters  that  should  be  left  to 
municipal  discretion. 

1  People  vs.  Hurlbut,  24  Mich.,  44,  and  People  vs.  Detroit,  28 
Mich.,  228,  Judge  Cooley  delivering  the  opinion  of  the  court.  See 
also  State  vs.  Denny,  118  Ind.,  382,  and  Evansville  vs.  State,  118 
Ind.,  426,  adopting  the  same  view.  See  also  People  vs.  Lynch,  51 
Cal.,  15,  and  Schumacher  vs.  Toberman,  56  Cal.,  508.  See,  how- 
ever, Commonwealth  vs.  Plaisted,  148  Mass.,  375,  repudiating  the 
principle  of  the  text. 

3  Pennsylvania.  New  Jersey,  Illinois,  Missouri,  Minnesota,  Ne- 
braska, Louisiana,  Texas,  Mississippi,  Kentucky,  Montana,  Idaho, 
Colorado,  Wyoming,  Washington,  and  California  have  the  fullest 
provisions  of  the  sort  referred  to  in  the  text. 


438  MUNICIPAL   MONOPOLIES. 

Governor  Russell  of  Massachusetts  called  em- 
phatic attention  to  this  in  his  address  to  the  Legis- 
lature in  1891,  and  again  in  1892  and  1893.  He 
advocated  a  large  extension  of  the  rights  of  cities 
and  towns,  not  only  as  justice  to  them,  but  as  a 
needed  relief  to  the  Legislature.  He  said  that  in 
1892  about  one-third  of  the  440  Acts  of  the  Mas- 
sachusetts Legislature  were  special  laws  passed  on 
the  application  of  25  cities  and  85  towns  in  refer- 
ence to  matters  of  local  business.  The  Fassett 
Committee,  appointed  in  1890  by  the  New  York 
Senate  to  investigate  municipal  government  in 
that  State,  found  that  in  the  six  years,  from  1884 
to  1889  inclusive,  the  New  York  Legislature 
passed  1,284  Acts  relating  to  the  30  cities  of  the 
State,1  390  of  the  Acts  affecting  the  city  of  New 
York.  In  1886,  280  out  of  681  statutes  were 
local  municipal  laws.     The  Committee  says  :  — 

"  Our  cities  have  no  real  local  autonomy ;  local  self-gov- 
ernment is  a  misnomer,  and  consequently  so  little  interest 
is  felt  in  matters  of  local  business  that  in  almost  every  city 
in  the  State  it  has  fallen  into  the  hands  of  professional 
politicians."  2 

Home  rule  for  municipalities   has  received  con- 
siderable support  in  the  last  few  years;3  and  it 

i  Senate  Com.  Rep.,  vol.  v.,  p.  459.  2  Ibid,  p.  13. 

3  See  Oberholtzer,  "Home  Rule  for  Amer.  Cities,"  Annals 
Am.  Acad.  Pol.  Sci.,  3-7361,  893;  Seth  Low,  "Municipal  Home 
Rule,"  address  at  Brooklyn,  Oct.  6, 1882 ;  J.  S.  Fassett,  "  Unmixed 
Self-Rule  for  Cities ;  "  Our  Day,  7^11, 1891 ;  Prof.  F.  J.  Goodnow, 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     439 

certainly  would  very  greatly  simplify  municipal 
government  and  accelerate  municipal  progress  if 
the  French  and  German  rule,  according  full  mu- 
nicipal liberty  to  do  any  act  not  contrary  to  the 
provisions  of  State  and  national  law,  and  Judge 
Cooley's  rule  of  limitation  on  legislative  power, 
with  a  guaranty  of  local  election  or  appointment 
of  municipal  officers,  and  the  ordinary  restrictions 
as  to  special  legislation,  could  all  be  incorporated 
in  the  Constitution  of  every  State  in  the  Union. 
The  Constitution  of  every  State  should  define  the 
scope  of  State  control  as  clearly  as  the  Federal 
Constitution  defines  the  scope  of  national  control ; 
all  laws  should  be  required  to  be  general,  and  con- 
fined to  State  interests ;  and  no  statute  should  be 
valid  that  attempts  to  exert  a  larger  control  over 
the  private  property  or  business  of  a  municipality 
than  may  be  lawfully  exerted  over  similar  property 
and  business  in  the  hands  of  private  corporations. 
The  rule  should  be,  not  that  a  city  or  town  can  do 
only  what  it  has  received  permission  to  do,  but 
that  within  its  sphere  of  local  public  action  it  may 
do  anything  it  is  not  forbidden  to  do.     Then  a 

"  Municipal  Home  Rule,"  McMillan  &  Co.,  1895:  Address  of  Dr. 
James  of  Chicago  University  in  Proceedings  of  National  Muni- 
cipal League,  vol.  i. ;  Parsons  on  "Municipal  Liberty,"  in  Boston 
Law  Magazine,  May,  1897,  and  in  the  Proceedings  of  the  League 
of  American  Municipalities  at  the  Detroit  Convention,  1898;  and 
a  much  fuller  treatment  by  Professor  Parsons  in  "  The  Rights  of 
Cities,"  Equity  Series,  No.  2,  to  be  published  iu  December,  1898, 
by  C.  F.  Taylor  of  Philadelphia. 


440  MUNICIPAL  MONOPOLIES. 

city  or  town  or  village  would  not  have  to  educate 
the  whole  State  up  to  a  new  idea  in  order  to  take 
a  progressive  step  in  the  management  of  its  local 
affairs ;  the  chaos  of  local  laws  would  cease,  and 
the  eternal  running  to  the  Legislature  for  permis- 
sion to  enlarge  the  Jonesville  water-works,  get  a 
new  engine  for  the  fire-department  in  Plymouth, 
or  have  a  street  railway  in  Pelham,  would  be  no 
more  ;  civic  independence  would  develop  civic  in- 
terest, pride,  and  patriotism  ;  elasticity,  simplicity, 
and  spontaneity  would  take  the  place  of  indiffer- 
ence and  cumbrous  complexity ;  local  self-govern- 
ment would  be  substituted  for  State  paternalism ; 
and  the  schemes  of  unscrupulous  men  for  captur- 
ing offices,  contracts,  and  franchises  through  legisla- 
tive influence  would  be  confined  to  much  narrower 
limits  than  now.  There  are  few  legal  measures 
before  our  citizens  to-day  of  so  much  importance 
as  the  establishment  of  municipal  home  rule. 


n.    COMPETITION. 

The  Right  of  the  Public  to   Compete  with  Private 
Enterprises. 

If  the  Legislature  grants  a  private  individual 
or  corporation  an  exclusive  right,  and  does  not 
reserve  a  power  of  revocation,  it  cannot  authorize 
an  undertaking  in  competition  with  the  business 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     441 

protected  by  said  exclusive  grant,  except  upon  full 
compensation. 

The  grant  is  a  contract,  and  is  protected  by  the 
Federal  Constitution.  Such  exclusive  grants  are 
strictly  construed.  An  exclusive  gas  franchise 
does  not  prevent  the  granting  of  an  electric-light 
franchise  in  the  same  field.1 

An  exclusive  grant  of  the  right  to  supply  a  city 
with  water  from  Three  Mile  Creek  is  not  impaired 
by  a  second  grant  to  another  to  supply  the  city 
with  water  from  any  other  source  than  Three  Mile 
Creek.2 

If  the  context  shows  that  the  Legislature  intended 
to  grant  an  exclusive  privilege  only  as  against  other 
private  corporations,  a  municipality  is  not  excluded ; 
or  if  the  Legislature  (in  1867)  grants  a  town  the 
right  to  build  water-works  on  a  vote  of  the  people 
to  that  effect,  and  afterward  (1874)  makes  the 
rights  of  existing  water  companies  exclusive  in 
their  districts,  the  prior  grant  to  the  town  is  not 
shut  out,  although  the  said  vote  was  not  taken 
till  after  the  company  accepted  the  provisions  of 
the  law  of  1874.3 

An  exclusive  grant  does  not  shut  out  the  right 
of  eminent  domain.  No  matter  how  exclusive  the 
franchise,  it  may  be  taken  by  the  State,  or  a  niii- 

1  Newport  L.  Co.  vs.  Newport,  151  U.  S.,  527  (1893). 

2  Stein  vs.  Bienville  Water  Supply  Co.,  141  U.  S.,  67,80  (1870). 

3  Lehigu  Water  Co.'s  Appeal,  102  Pa.  St.,  515,  527. 


442  MUNICIPAL  MONOPOLIES. 

nicipality  under  State  authority,  upon  payment  of 
full  value  for  the  privilege  taken.  This  right  of 
eminent  domain  cannot  be  forfeited  by  legislative 
action ;  a  legislative  agreement  not  to  exercise  the 
power  of  eminent  domain  is  void,  as  no  legislature 
has  authority  to  give  away  the  fundamental  powers 
of  government.1 

A  grant  will  not  be  construed  to  be  exclusive 
unless  it  is  made  so  in  express  terms,  or  by  neces- 
sary implication.2 

If  no  exclusive  grant  is  affected,  the  State  may 
act,  or  authorize  a  city  or  town  to  act,  in  competi- 
tion with  private  enterprise  without  compensation 
for  the  injury  done  to  private  business.  Wherever 
an  individual  or  a  company  can  compete,  the  pub- 
lic may  do  the  same.  The  rights  of  a  million  men 
who  form  a  city  are  not  less  than  those  of  a  dozen 
men  who  form  a  corporation,  and  it  makes  no  dif- 
ference whether  the  business  is  one  that  requires  a 
franchise  or  not. 

"  Where  the  grant  is  not  by  its  terms  exclusive,  the  Legis- 
lature is  not  precluded  from  granting  a  similar  franchise  or 
erecting  a  rival  way  or  structure,  the  result  of  which  may 
be  to  greatly  impair  or  even  totally  destroy  the  value  of 
the  former  grant ;  and  such  damage  is  not  a  taking  of  the 

1  Cooley  on  Const.  Lims.,  339.  See  also  Crosby  vs.  Hanover, 
3G  N. H.,  404;  a  franchise  however  exclusive  may  be  taken  in 
whole  or  in  part  upon  fair  compensation. 

2  Lewis  on  Eminent  Domain,  §  136.  Turnpike  Co.  vs.  The 
State  (Md.),  3  Wall.,  210. 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     443 

former  franchise  which   entitles  its  owner  to    compensa- 
tion." 1 

If  no  exclusive  privileges  are  conferred  expressly 
or  by  necessary  implication,  the  Legislature  is  free 
to  authorize  the  construction  of  a  rival  road,  al- 
though it  may  affect  the  earlier  franchise  very 
injuriously.  The  State  impairs  no  contract  by 
chartering  a  second  company,  although  it  largely 
manages  it  and  profits  by  it  to  the  injury  of  the 
first.2 

The  leading  case  is  Charles  River  Bridge  vs. 
Warren    Bridge.3     A  toll-bridge  was    established 

1  Lewis,  §  136. 

2  Turnpike  Co.  vs.  The  State  (Md.),  3  Wall.,  210,  213  (18G5). 
The  court  says,  "It  might  have  been  very  proper  for  the  State, 
when  chartering  the  railroad,  to  have  provided  for  compensation 
for  the  prospective  loss  to  the  Turnpike  Co.,  as  has  frequently 
been  done  in  other  States  under  similar  circumstances ;  but  this 
was  a  question  resting  entirely  with  the  Legislature  of  the  State, 
and  their  action  is  conclusive  on  the  subject." 

3  7  Pick.  (Mass.),  344,  464  (1829),  11  Pet.  (U.  S.)  420;  Taney,  C. 
J.,  536,  546,  549.  The  first  company  took  their  grant  subject  to 
the  general  authority  of  the  Legislature  to  make  further  grants. 

Dissent  by  Putnam,  J.  (7  Pick.,  477,  et  seq.,  citing  Eng.  cases 
to  show  that  a  ferry  cannot  be  established  so  near  to  an  old  one  as 
to  draw  away  its  custom),  and  by  Parker,  C.  J.,  at  514,  holding 
that  the  establishment  of  a  new  bridge  near  an  old  one  was  not  a 
taking  of  property  for  public  use,  but  that  the  nature  of  our  gov- 
ernment prohibited  the  Legislature  from  making  a  grant  to  the 
necessary  injury  of  a  prior  grant  without  provision  for  just  com- 
pensation.    The  Chief  Justice  said  :  — 

"  This  restriction  upon  the  sovereign  power  (requiring  com- 
pensation for  property  taken  for  public  use)  does  not,  I  apprehend, 
depend  on  any  limitation  of  its  authority  by  written  constitution, 
but  results  from  immutable  principles  of  justice,  which  require  an 
equal  contribution  to  public  exigencies,  and  would  prohibit  the 


444  MUNICIPAL  MONOPOLIES. 

under  legislative  grant.  Afterward  another  bridge 
privilege  was  granted  near  the  first  and  under  con- 
ditions which  made  it  free  in  a  few  years,  thereby 
completely  destroying  the  value  of  the  first  fran- 
chise. It  was  held  that  the  Charles  River  Bridge 
Co.  had  no  remedy.  Their  grant  was  not  exclusive 
in  terms,  and  could  not  be  extended  by  implication 
for  several  reasons. 

"  (1)  It  was  made  by  agents  appointed  for  short  periods 
and  with  limited  powers ;  (2)  The  grant  itself  was  a  re- 
striction on  the  power  of  subsequent  legislatures ;  (3)  The 
extension  of  the  grant  is  in  derogation  of  the  rights  and 
against  the  interests  of  the  people  ;  (4)  It  tends  to  promote 
monopolies  and  exclusive  privileges  which  ever  ought  to 
be  guarded  against  and  restrained ;  (5)  Such  constructions 
of  existing  grants  would  prove  an  insuperable  obstacle  to 
future  improvements." 

In  the  same  decision,  pp.  457-458,  the  court 
says : — 

'•  In  many  cases  the  Legislature  have  established  new 
turnpikes,  some  nearly  parallel  with  and  diverting  travel 
to  the  injury,  and  sometimes  ruin,  of  former  ones.  There 
never  has  been  brought  before  any  judicial  tribunal  a  ques- 
tion as  to  the  constitutionality  of  these  charters.  But  many 
adjudications  have  been  based  on  their  validity.     There  is 

sacrifice  of  the  property  of  one,  even  for  the  advantage  of  the 
whole.  Such  principles  are  recognized  in  all  civilized  govern- 
ments, and  if  not  expressly  declared,  are  practically  acted  upon. 
2  Kent.  Com.,  270." 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     445 

no  contract  by  the  commonwealth  that  no  new  charter  shall 
be  granted,  which  shall  interfere  with  the  business  or  profits 
of  the  old."     (See  also  p.  473.) 

In  another  case  a  free  bridge  was  erected  within 
49  feet  of  a  toll  bridge,  totally  destroying  the  value 
of  the  former  franchise,  and  it  was  held  that  there 
was  no  remedy,  although  the  right  to  grant  a  sec- 
ond franchise  was  not  expressly  reserved  in  the 
former  grant,  it  being  implied  unless  expressly  pro- 
hibited by  the  first  grant.1 

In  Ohio  the  law  permits  any  city  or  town  to 
erect  or  purchase  gas-works  whenever  the  council 
deems  it  expedient.2  And  a  city  may  procure  its 
own  gas-works,  and  supply  the  city  and  its  citizens, 
although  a  gas  company  incorporated  before  this 
law  was  enacted  is  in  operation  in  the  city,  and  is 
not  in  any  default.  The  construction  of  gas-works 
by  the  city  under  such  a  law  does  not  impair  the 
obligation  of  contract.  The  gas  companies  took 
their  charters  subject  to  such  contingencies,  which 
might  arise  at  any  time  by  the  exercise  of  legisla- 
tive power  to  authorize  municipal  works.3 

In  Iowa  a  city  or  town  may  purchase,  establish, 

i  Fort  Plain  Bridge  Co.  vs.  Smith,  30  N.Y.,  44,  62  (1864) ;  cit- 
ing 11  Pet.,  420;  1  Barb.,  Ch.  547. 

2  Ohio  Statutes,  Revis.  of  1897,  §§  2486-7;  State  vs.  City  of 
Hamilton,  47  Ohio  St.,  52;  Hamilton  Gas  Light  Co.  vs.  Hamilton 
City,  146  U.  S.,  258,  265-6  (1892). 

3  Hamilton  Gas  Light  Co.  vs.  Hamilton  City,  146  U.S.,  258, 
268  (1892). 


440  MUNICIPAL   MONOPOLIES. 

erect,  maintain,  and  operate,  within  or  without  the 
corporate  limits,  water-works,  gas-works,  electric- 
light  and  power  plants,  and  may  grant  to  individ- 
uals or  corporations  authority  to  erect  and  maintain 
such  works.  The  term  is  not  to  exceed  twenty- 
five  years.  No  exclusive  franchise  is  to  be  granted  ; 
and  no  such  plants  can  be  authorized,  established, 
erected,  purchased,  leased,  or  sold,  or  franchise  ex- 
tended or  renewed,  unless  the  proposition  is  favored 
by  a  majority  of  the  electors  voting  on  it  at  a  gen- 
eral or  special  election.  Under  these  provisions, 
it  is  held  that  a  municipality  may  supply  its  in- 
habitants with  light  or  water  by  a  plant  of  its  own, 
although  a  franchise  for  the  same  purpose  may 
previously  have  been  granted  by  the  municipality 
to  a  private  company.1 

The  "Indiana  Statutes  "  (1896)  provide  that — 

"  in  cities  of  35,000  or  more  population,  the  city  board  of 
public  works  (appointed  by  the  mayor)  shall  have  power  to 
purchase  or  erect,  by  contract  or  otherwise,  and  operate  gas- 
works, electric-light  works,  street-cars  and  other  lines  for 
the  conveyance  of  passengers  and  freight,  telegraph  and 
telephone  lines,  steam  and  power  houses  and  lines,  to  sup- 
ply the  city  and  its  inhabitants,"  or  to  purchase  and  hold  a 
majority  of  the  stock  of  corporations  organized  for  either 

1  Thomson-Houston  Electric  Co.  vs.  Newton,  42  Fed.  Rep..  723; 
bill  to  enjoin  the  city  from  erecting  an  electric  plant,  the  com- 
pany having  spent  $20,000  in  building  a  plant  under  its  franchise 
previously  granted  it  by  the  city,  and  being  aide  to  furnish  all  the 
electricity  needed.    See  Iowa  Code,  1897. 


TUE  LEGAL   ASPECTS   OF  MONOPOLY.     447 

of  the  above  purposes.  Also  "  to  authorize  and  empower 
by  contract,  telegraph,  telephone,  electric-light,  gas,  steam 
or  street  car  or  railroad  companies  to  use  any  street,  and 
prescribe  terms  and  conditions  of  such  use,  except  that  fran- 
chises are  not  to  be  for  a  longer  term  than  twenty-five  years, 
nor  for  a  less  return  than  2  per  cent  of  the  gross  receipts. 
The  exercise  of  all  these  powers  is  subject  to  the  approval 
of  the  city  council,  which  has  '  exclusive  control  of  the 
streets.'  " 

In  Kansas,  under  the  laws  of  1897,  any  muni- 
cipality may  build  or  buy  gas,  electric -light  or 
power,  water  or  heating  plants,  and  sell  to  its 
inhabitants. 

In  California  sixth-class  cities  (all  municipali- 
ties under  3,000  inhabitants)  may  acquire,  own, 
construct,  maintain,  and  operate  street  railways, 
telegraph  and  telephone  systems,  gas  and  other 
works  for  heat  and  light ;  and  fifth-class  cities 
(municipalities  between  3,000  and  10,000  popula- 
tion) may  purchase,  lease,  or  construct  water  or 
electric-light  works,  and  sell  water,  heat,  light,  and 
power. 

In  Missouri  any  municipality  may  build  or  buy 
water,  gas,  electric-light  or  power  plants,  and  sell 
water,  gas,  etc.,  to  inhabitants. 

In  South  Carolina  the  Constitution  of  1895  pro- 
vides that  any  city  or  town,  on  a  vote  of  a  majority 
of  its  electors,  may  build  or  buy  water-works  or 
light-plants,  and  supply  its  inhabitants. 

Utah's  statutes  in  a  single  clause  give  city  coun- 


448  MUNICIPAL  MONOPOLIES. 

cils  power  to  construct  and  maintain  water-works, 
gas-works,  electric-light  works,  street  railways,  or 
bath-houses,  or  to  authorize  the  construction  and 
maintenance  of  the  same  by  others,  or  to  purchase 
any  or  all  of  said  works  from  any  person  or  corpo- 
ration. 

The  Washington  statutes  of  1897,  chap.  112, 
provide  that  any  incorporated  city  or  town  may 
construct  or  buy,  own  and  operate,  water-works 
(within  and  without  its  limits),  gas,  electric-light, 
or  other  light  plants  (to  serve  the  city  or  town  and 
its  inhabitants  with  public  or  private  supplies  of 
water,  light,  heat,  and  power),  and  cable,  electric, 
or  other  railroads  within  its  limits  for  the  transpor- 
tation of  freight  or  passengers.  A  referendum  is 
necessary  ;  and  if  debt  is  to  be  incurred,  the  propo- 
sition must  be  adopted  by  a  three-fifths  vote  at  the 
polls. 

In  Wisconsin  any  city  or  village  may  buy  water- 
works or  light-plants ;  municipalities  may  build 
lighting-plants  for  street  service,  and  may  buy  com- 
mercial plants,  or,  if  there  are  none,  or  none  will- 
ing to  sell,  the  city  may  erect  such  plants. 

The  Minnesota  Statutes  (1894),  §2592,  provide 
that  no  corporation  shall  establish  gas,  electric 
light,  heat,  transportation,  or  other  improvement 
except  on  obtaining  a  franchise  from  the  city  or 
village  and  making  just  compensation ;  and  at  the 
end  of  each  and  every  franchise  period  of  five  years 


THE  LEGAL   ASPECTS    OF  MONOPOLY.     449 

the  council  may,  on  a  two-thirds  vote  of  the  electors 
of  the  city  or  village,  buy  at  eminent  domain  value, 
and  own  and  operate,  the  gas,  electric-light,  street- 
railway,  water,  telephone,  heat,  or  power  works.1 

In  1891  Massachusetts  passed  an  Act  permitting 
cities  and  towns  to  manufacture  and  distribute  gas 
and  electricity,  build  or  buy,  maintain  and  operate, 
gas  or  electric-light  works,  and  supply  light  to  the 
city  or  town  and  its  inhabitants.  An  amendment 
in  1894  permitted  municipalities  to  furnish  gas  or 
electricity  for  heat  and  power  except  for  operating 
electric  cars.  A  city  must  have  a  two-thirds  vote 
in  each  council,  and  approval  of  the  mayor  in  each 

1  Five  States  have  general  laws  empowering  municipalities  to 
own  and  operate  street-railways.  In  Minnesota  any  city  or  village 
has  this  right  on  a  two-thirds  referendum  vote.  In  California 
the  right  belongs  to  sixth-class  cities ;  to  cities  of  more  than  35,000 
population  in  Indiana ;  to  every  city  council  in  Utah ;  and  to  every 
incorporated  city  or  town  in  Washington. 

Ten  States  have  general  laws  authorizing  municipal  telegraphs 
or  telephones  or  both,  and  in  five  of  the  States  the  power  is  com- 
mercial. In  Kentucky  third-class  cities  (8,000  to  20,000)  may  sup- 
ply their  inhabitants  with  telephone  service.  In  Washington  third- 
class  cities  (1,500  to  10,000)  and  towns  (all  municipalities  of  less 
than  1,500  people)  have  authority  to  construct  and  maintain  tele- 
graph and  telephone  lines.  In  California  municipalities  of  less 
than  15,000  population  have  unrestricted  power  to  build  and  ope- 
rate telegraph  and  telephone  systems';  but  for  larger  places  there 
is  no  general  provision  for  anything  more  than  a  fire-alarm  or  a 
police  telegraph.  The  laws  of  Minnesota  and  Indiana  have  al- 
ready been  stated  in  the  text. 

In  Parsons  on  "  Government  by  the  People,"  Equity  Series,  No. 
2  (published  by  C.  F.  Taylor,  Philadelphia),  will  be  found  a  much 
more  complete  treatment  of  the  rights  of  municipalities  than  is 
possible  here. 


450  MUNICIPAL   MONOPOLIES. 

of  two  consecutive  years,  and  ratification  by  the 
majority  of  the  electors  at  an  annual  municipal 
election.  A  town  must  have  a  two-thirds  vote  in 
each  of  two  legal  town  meetings,  2  to  13  months 
apart.  The  municipality  must  buy  suitable  exist- 
ing works  if  the  owners  file  a  schedule  of  property 
and  terms  of  sale  with  the  clerk  of  the  city  or 
town  within  30  days  after  the  final  vote  to  estab- 
lish municipal  works.1 

The  supreme  court  remarked  in  the  Wakefield 
case,  that  "  the  Legislature  might  have  authorized 
cities  and  towns  to  erect  and  maintain  such  plants 
without  requiring  the  purchase  of  any  existing 
plants."  2 

It  is  a  question  how  far  it  is  fair  for  the  public 
to  enter  into  competition  with  private  parties.  It 
may  be  said  that  one  man  or  ten  men  have  a  right 

1  The  Florida  Acts  of  1897  contain  a  statute  modeled  on  the 
Massachusetts  law.  It  does  not,  however,  require  double  adop- 
tion,—  a  two-thirds  vote  of  council,  approval  of  mayor,  and  ratifi- 
cation by  the  voters  at  the  polls,  being  sufficient,  without  repeating 
the  operation  the  following  year.  If  the  proposition  fails  at  the 
polls,  no  similar  proposal  can  be  submitted  for  ratification  within 
one  year. 

The  extreme  restrictions  in  Massachusetts  are  due  to  the  stren- 
uous efforts  of  the  lighting-companies.  It  took  a  three  years' 
struggle  to  get  the  law ;  and  even  then  i,t  was  not  possible  to  pass 
it,  except  with  amendments  which  seriously  diminish  its  value. 
(See  infra.)  The  law  is,  however,  much  better  than  none.  Before 
it  was  passed,  cities  and  towns  in  Massachusetts  had  no  power  to 
establish  electric  plants,  even  to  light  their  own  streets.  Spaul- 
ding  vs.  Peabody,  153  Mass.,  120  (1890). 

2  Citizens  Gas  Light  Co.  vs.  Wakefield,  101  Mass.,  432,  439. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     451 

to  compete  with  existing  industries,  and  surely  the 
right  of  100,000  men,  constituting  a  city,  cannot 
be  less  than  the  right  of  ten  men.  On  the  other 
hand,  it  is  to  be  noted  that  a  public  service  may 
be  operated  at  cost,  or  even  below  it,  the  deficit 
being  made  up  by  taxation,  so  that  a  private  busi- 
ness is  at  the  mercy  of  a  public  rival.  A  small 
private  business  is  at  the  mercy  of  a  large  private 
business,  especially  if  the  latter  enjoys  a  railway 
rebate,  or  possesses,  through  a  trust  or  combina- 
tion, a  virtual  monopoly  of  the  field.  Public  senti- 
ment and  law  condemn  such  operations  as  lacking 
in  fair  play,  and  public  competition  at  rates  too 
low  to  afford  a  living  to  private  enterprises  may 
be  at  times  equally  unfair.  The  law  is  perfectly 
clear  that  where  no  exclusive  franchise  is  affected, 
the  public  may  compete  with  private  business. 
But  ethics  can  hardly  yield  assent  to  such  a  doc- 
trine. It  means  the  right  to  destroy  private  prop- 
erty. The  law  that  forbids  a  State  to  take  a  bridge 
and  its  franchise  except  upon  full  compensation, 
and  yet  permits  the  State  to  build  a  free  bridge 
by  the  side  of  the  first  and  rob  it  of  all  its  value, 
is  not  a  consistent  law.  The  government  stands 
for  justice  —  it  should  not  be  unjust ;  for  protec- 
tion —  it  should  not  destroy ;  for  peace  —  it  should 
not  make  war.  It  is  the  part  of  the  public  to  set 
an  example  of  cooperation,  not  of  competition. 
When  the  public  good  requires  a  State  or  mu- 


452  MUNICIPAL   MONOPOLIES. 

nicipality  to  engage  in  business  in  opposition  to 
private  interests  that  have  grown  up  under  the 
sanction  of  law,  it  is  only  fair  that  compensation 
should  be  made  so  far  as  possible.  The  change  to 
public  action  is  for  the  benefit  of  the  community, 
and  the  cost  and  burden  of  it,  so  far  as  possible, 
should  be  borne  by  the  community,  and  not  al- 
lowed to  fall  with  crushing  weight  on  any  indi- 
vidual. Note  the  words,  "  so  far  as  possible."  In 
many  cases  it  may  be  impossible  to  estimate  dam- 
ages ;  but  where  the  effect  is  swiftest,  and  the 
need  of  adjustment  most  intense,  an  estimate  can 
usually  be  made.  If  a  city  should  open  a  grocery 
store  on  a  small  scale,  enlarging  it  little  by  little, 
the  effect,  as  a  rule,  would  be  diffused  and  grad- 
ual, very  difficult  to  estimate,  and  at  the  same  time 
not  of  so  much  importance  that  it  be  estimated, 
because  its  diffusion  and  gradualness  would  pre- 
vent any  sudden  and  crushing  disaster  to  those 
already  in  the  business.  But  if  a  city  or  county 
or  State  parallels  a  toll-road  with  a  highway  free 
of  toll,  or  builds  a  bridge  by  the  side  of  a  private 
ferry,  a  sudden  and  crushing  loss  occurs  that  is  not 
difficult  to  estimate,  and  ought  to  be  estimated  and 
borne  by  the  public.  In  every  case  the  methods 
of  transition  should  be  such  as  to  secure  a  just 
diffusion  of  the  burdens  of  the  change  so  far  as 
practicable, 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     453 

III.    PURCHASE. 

Tlie  Right  of  the  Public  to  Take  Private  Property, 
and  the  Price  that  Must  be  Paid. 

The  State  may  take,  or  authorize  a  city  or  town 
to  take,  any  private  property  that  is  desired  for 
public  use.  Even  rights  protected  by  a  grant  that 
is  by  its  terms  exclusive  and  irrepealable  may  be 
taken  under  this  power  of  eminent  domain,  or  pre- 
eminent domain  as  it  might  be  called.  The  sole 
conditions  are  that  the  taking  shall  be  for  a  public 
purpose,  and  that  full  compensation  shall  be  made.1 
The  Fifth  Amendment  to  the  National  Constitution 
provides  that  private  property  shall  not  be  taken 
without  just  compensation.  What  constitutes 
just  compensation  is  a  judicial  not  a  legislative 
question.2    It  may  be  determined  by  any  impartial 

1  A  statute  authorizing  a  board  of  transportation  to  require  a 
railroad,  that  has  granted  elevator  sites  on  its  right  of  way  near 
a  station,  to  grant  on  like  terms  another  elevator  location  on  that 
right  of  way  to  other  private  parties,  is  invalid.  The  taking  of 
the  private  property  of  one  person  or  corporation,  without  the 
owner's  consent,  for  the  private  use  of  another,  is  not  due  process 
of  law,  and  is  a  violation  of  the  Fourteenth  Amendment  of  the 
Federal  Constitution.  (Missouri  Pre.  Ry.  Co.  vs.  Nebraska,  164 
U.S.,  403.) 

2  Monongahela  Nav.  Co.  vs.  United  States,  148  U.S.,  312,  327, 
342.  The  court  said,  "  The  Legislature  may  determine  what  pri- 
vate property  is  needed  for  public  purposes,  —  that  is  a  question 
of  a  political  and  legislative  character;  but  when  the  taking  has 
been  ordered,  then  the  question  of  compensation  is  judicial.  It 
does  not  rest  with  the  public  taking  the  property,  through  Con- 
gress or  the  Legislature,  to  say  what  compensation  shall  be  paid, 
and  the  ascertainment  of  that  is  a  judicial  inquiry." 


4-34  MUNICIPAL   MONOPOLIES. 

tribunal  the  Legislature  may  choose  to  designate;1 
but  the  Legislature  cannot  itself  determine  the 
amount  to  be  paid,2  nor  can  it  give  the  munici- 
pality a  right  to  fix  the  damages.3  One  of  the 
parties  to  a  transaction  cannot  be  regarded  as  an 
impartial  tribunal  in  respect  to  it.  The  assess- 
ment of  damages  may,  however,  be  made  by  a 
committee  of  the  city  council,  if  it  is  provided 
that  the  owner  may  have  a  review  in  the  courts 
on  application.4 

As  a  general  rule,  the  measure  of  damages  is  the 
fair  market  value  of  the  property.  In  the  case  of 
land,  the  annual  profits  will  not  be  considered,5  but 

1  People  vs.  Smith,  21  N.  Y.,  595.  In  the  absence  of  constitu- 
tional provision  to  the  contrary, the  tribunal  may  be  a  jury  or  a  com- 
mission, or  a  court  without  a  jury,  Oakes  Ames  vs.  Rd.,  21  Minn., 
241 ;  but  decision  by  a  board  appointed  by  the  Legislature,  and  act- 
ing without  notice  to  or  hearing  of  the  owners  of  the  property,  will 
not  suffice  (16  Minn.,  375) ;  a  hearing  or  opportunity  for  one  is 
essential  to  a  judicial  procedure.  In  Pennsylvania  the  constitu- 
tion secures  an  appeal  and  trial  by  jury  when  private  property  is 
taken  by  a  municipal  corporation.  Bachler's  Appeal,  90  Pa.  St., 
207. 

2  11  Pet.,  420.  See  also  60  Md.,  263;  — the  Legislature  cannot 
fix  the  compensation  in  the  law  itself. 

3  53  111.,  105. 

4  McMicken  vs.  Cincinnati,  4  Ohio  St.,  394. 

5  Lewis  on  Eminent  Domain,  §487.  "It  is  incompetent  to 
go  into  the  profits  of  the  business  carried  on  upon  the  property. 
No  damages  can  be  allowed  for  injury  to  business.  (106  111.,  253; 
111  111.,  499;  109  Mass.,  438;  107  Pa.  St.,  461;  49  Cal.,  139.) 

"  Any  incidental  loss  or  inconvenience  in  business,  which  may 
result  from  a  change  consequent  upon  the  taking,  must  be  borne 
by  the  owner,  for  the  sake  of  the  general  good  in  which  he  parti- 
cipates."   (118  111.,  587.) 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     455 

the  owner  may  show  what  he  gave  for  the  property 
and  what  improvements  he  has  made,  and  witnesses 
versed  in  land  values  of  the  neighborhood  may  be 
asked  the  value  of  the  realty,  not  at  forced  sale, 
but  at  ordinary,  voluntary  sale ;  and  that  is  the 
measure  of  compensation  under  the  law  of  eminent 
domain.1 

When  a  city  opens  a  new  street  that  crosses  a 
railroad,  the  measure  of  damages  is  the  decrease  of 
value  of  the  railway's  land  for  use  for  railway  pur- 
poses caused  by  its  use  for  street  purposes.  The 
railway  cannot  recover  the  value  of  the  fee  in  the 
land,  for  the  city  merely  takes  an  easement;  nor 
can  it  recover  the  cost  of  erecting  gates,  planking 
the  crossing,  and  maintaining  flagmen  at  the  new 
street.  All  property  is  owned  subject  to  the  power 
of  the  State  to  regulate  its  use  in  £uch  manner  as 
not  to  endanger  unnecessarily  the  lives  and  per- 
sonal safety  of  the  people.  The  requirement  that 
compensation  be  made  for  private  property  taken 
for  public  use  imposes  no  restriction  on  the  inhe- 
rent power  of  the  State  to  protect  the  lives  and 
secure  the  safety  of  the  people.2 

In  estimating  the  compensation,  special  and 
direct  benefits  from  the  highway  or  public  under- 


1  Moulton   vs.  Newburyport  Water  Co.,  137  Mass.,  163;   100 
Mass.,  350;  125  Mass.,  1  and  544;  112  111.,  580;  31  Minn.,  297. 

2  Chicago,  Burlington  &  Quincy  R.  R.  vs.  Chicago,  166  U.S., 
226  (1896). 


456  MUNICIPAL  MONOPOLIES. 

taking  capable  of  present  estimate  and  reasonable 
computation  may  be  deducted.1 

When  a  franchise  is  taken,  the  net  earnings  are 
generally  considered,2  and  also  the  market  value  of 
the  capital  stock,  if  there  is  any.  In  Monongahela 
Nav.  Co.  vs.  United  States,3  the  court  decided  that 
in  construing  the  Act  of  Congress,  Aug.  11. 1888, 
ordering  a  lock  and  dam  to  be  taken  for  public  use, 
the  clause  providing  that  — 

"  in  estimating  the  sum  to  be  paid  by  the  United  States,  the 
franchise  of  said  corporation  to  collect  tolls  shall  not  be 
considered," 

was  not  valid  nor  binding  on  the  court.  The  court 
continued  — 

"  How  shall  just  compensation  for  this  lock  and  dam  be 
determined?  The  value  of  property,  generally  speaking,  is 
determined  by  its  productiveness,  —  the  profits  which  its  use 

i  Bauman  vs  Ross,  167  U.  S.,  548  (1897). 

2  "When  a  bridge  and  franchise  are  taken,  the  tolls  may  be 
used  to  measure  the  damages.  (Montgomery  County  vs.  Schuylkill 
Bridge  Co.,  110  Pa.  St.,  54.)  So  the  amount  of  tolls  is  competent 
evidence  where  a  ferry  right  is  injured  by  the  erection  of  a  bridge. 
(Columbia  Delaware  Bridge  Company  vs.  Geisse,  38  N.  J.  L.,  39; 
Mason  vs.  Harper's  Ferry  Bridge  Co.,  17  W.  Va.,  396;  20  Id.,  223.) 
Exclusive  right  of  transportation  within  one-half  a  mile  of  the 
ferry  having  been  given,  and  a  bridge  erected  within  this  limit, 
Held  that  the  damages  to  the  ferry  were  measured  by  its  revenues, 
although  the  Legislature  might  in  future  take  away  the  franchise 
or  reduce  the  tolls. 

3  148  U.  S.,  312,  327;  citing  Charles  River  Bridge  vs.  Warren 
Bridge,  11  Pet-,  420,  571;  Commonwealth  vs.  Pittsburg  &c.  Rd., 
58  Pa.  St.,  26,  50;  Pa.  Rd.  vs.  B.  &  O.  Rd.,  60  Md.,  263;  Isoin  vs. 
Mississippi  Central  Rd.,  36  Miss.,  300,  315. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     457 

brings  to  the  owner.  The  value  is  not  determined  by  the 
mere  cost  of  construction,  but  more  by  what  the  completed 
structure  brings  in  the  way  of  earnings  to  its  owner."  1 

"  It  makes  no  difference  to  the  United  States  that  the 
State  of  Pennsylvania  reserved  the  right  to  take  the  prop- 
erty on  payment  of  the  original  cost  with  interest  —  the 
State  has  not  exercised  its  reserved  power  nor  transferred 
its  rights  to  the  United  States."  2 

Where  a  bridge  was  taken  for  public  use  in 
Pennsylvania,  the  court  said,  — 

"  Value  is  to  be  ascertained  not  only  by  the  cost  of  the 
structure,  but  also  by  the  value  of  the  franchises.  The 
value  of  the  company's  franchises  depends  largely  on  its 
earning  capacity.  The  value  of  its  capital  stock  may,  and 
generally  does,  indicate  with  some  accuracy  the  value  of  its 
franchises.  Hence  the  cost  or  value  of  the  structure,  the 
amount  of  net  tolls,  and  the  market  value  of  its  capital 
stock,  are  all  elements  to  be  considered  in  ascertaining  the 
value  of  the  bridge  and  its  corporate  franchises.  No  one 
of  these  elements,  standing  alone,  would  in  all  cases  furnish 
a  test ;  considered  together  they  will  seldom  fail  to  lead  to 
a  satisfactory  result."  3 

In  another  case  the  court  says,  — 

"  The  property  and  franchises  of  the  bridge  company  are 
represented  by  its  stock." 

The  income  for  the  past  five  years  is  proper 
evidence  of  the  value  of  the  franchise ;   its  value 

i  148  U.  S.,  at  328.  Mar.  27  (1893).  «  148  U.  S.,  at  343-4. 

3  C.  J.  Paxson  in  Mifflin  Bridge  Co.  vs.  Juniata  County,  144 
Fa.  St.,  365,  374-5  (1891). 


458  MUNICIPAL   MONOPOLIES. 

depends  on  its  productiveness.  The  mere  cost  of 
the  bridge  is  not  the  true  measure,  that  would 
take  the  franchise  for  nothing.1 

Where  the  Legislature  authorized  the  construc- 
tion of  a  bridge  and  payment  of  damages  to  a  ferry 
company,  the  measure  of  damages  was  held  to  be 
the  earnings  lost ;  and  evidence  of  the  earnings  re- 
ceived in  the  past  six  years  was  held  competent.2 

It  appears,  however,  that  compensation  is  not 
always  determined  by  market  value  or  productive- 
ness. In  a  Pennsylvania  turnpike  case  the  Supreme 
Court  said  that  the  public  could  not  take  the  prop- 
erty of  a  corporation  for  nothing,  merely  because 
its  stock  may  have  no  market  value,  or  the  prop- 
erty may  be  unproductive.  It  w?s  worth  to  the 
city  what  it  would  have  cost  to  grade  and  fix  the 
road  as  it  was  when  taken.3  If  this  rule  is  sound, 
it  would  seem  that  the  measure  of  compensation 
is  compounded  by  two  elements,  —  the  State  or 
city  must  pay  at  least  the  cost  of  duplicating  such 
improvements  as  will  be  of  use  to  the  public,  and 
if  the  property  has  a  market  value  that  rises  above 
the  said  cost,  the  public  must  pay  this  market 
value.  It  may  be  said  that  it  is  not  fair  to  require 
a  city  to  pay  for  property  that  has  no  market  value  ; 

1  Montgomery  County  vs.  Bridge  Co.,  110  Pa.,  54  (1885). 

2  Columbia  Delaware  Bridge  Company  vs.  Geisse,  38  N.  J.  L., 
39. 

3  In  re  Kensington  &c.  Turnpike  Co.,  97  Pa.  St.,  260,  277.  Dis- 
sent by  Sbarswood  C.  J.,  Trunkey  and  Sterrett,  J.  J. 


THE  LEGAL   ASPECTS    OF  MONOPOLY.     459 

and  on  the  other  hand,  it  may  be  said  that  the 
values  of  stocks  and  franchises  fluctuate.  A  com- 
pany that  could  not  sell  for  110,000  may  be  worth 
$100,000  two  or  three  years  from  now ;  and  it  is 
not  just  to  take  advantage  of  a  depreciation  that 
is  perhaps  temporary,  in  order  to  obtain  for  noth- 
ing a  property  on  which  large  sums  have  been 
expended  for  improvements  that  are  of  value  to 
the  taker. 

A  Legislature  may  squeeze  the  water  out  of 
stock,  and  reduce  the  market  value  of  a  franchise 
within  reasonable  limits,  by  exercising  its  power 
of  regulating  rates.1  The  police  power,  however, 
cannot  be  colorably  used  in  this  way  to  destroy 
vested  rights  without  compensation.2  Abolishing 
tolls,  or  making  a  toll  bridge  free,  is  a  "  taking  " 
within  the  Constitution,  and  demands  compensa- 
tion.3 

Where  a  franchise  is  not  exclusive,  the  water 
may  often  be  eliminated  by  competition ; 4  but  the 
process  frequently  requires  wasteful  duplications, 
and  is,  to  say  the  least,  a  kind  of  warfare. 

Where  the  Legislature  has  reserved  the  right  to 
repeal  a  franchise  granted  by  it,  it  may  terminate 

1  See  below,  fifth  subhead,  Regulation. 

2  Commonwealth  vs.  Essex  Co.,  13  Gray,  239;  55  Pa.,  466;  133 
111.,  413. 

3  Monongahela  Nav.  Co.  vs.  United  States,  148  U.S.,  312;  91 
Pa.,  216;  4  Gray,  474;  6  How.,  507. 

4  See  above,  second  subhead,  Competition. 


460  MUNICIPAL   MONOPOLIES. 

the  franchise  at  will,  and  leave  nothing  to  be  paid 
for  on  taking  the  property  except  the  physical 
plant,  which  in  many  cases  will  be  valued  at  the 
cost  of  duplication.1 

By  the  Massachusetts  lighting  law,  providing 
for  municipal  purchase  of  gas  and  electric  plants, 
the  price  of  the  property 

"  shall  be  its  fair  market  value  for  the  purposes  of  its 
use  (no  portion  of  such  plant  to  be  estimated,  however,  at 
less  than  its  fair  market  value  for  any  other  purpose),  in- 
cluding as  an  element  of  value  the  earning  capacity  of  such 
plant  based  upon  the  actual  earnings  being  derived  from 
such  use  at  the  time  of  the  final  vote.  Such  value  shall  be 
estimated  without  enhancement  on  account  of  future  earn- 
ing capacity  or  good  will,  or  of  exclusive  privileges  derived 
from  rights  in  the  public  streets." 

This  compels  the  municipality  to  pay  the  fall 
present  value  of  the  franchise  as  well  as  the  cost 

1  Greenwood  vs.  Freight  Co.,  105  U.  S.,  13,  17,  23.  Massachu- 
setts has  reserved  the  right  to  revoke  any  charter  of  incorporation 
suhsequent  to  March  11, 1831.  The  Legislature  repealed  the  char- 
ter of  a  street-car  company,  and  permitted  the  new  company  to 
take  the  old  tracks  suhject  to  the  laws  relating  to  the  taking  of 
land  and  the  compensation  to  be  made  therefor.  This  was  held 
valid  by  the  Supreme  Court  of  the  United  States.  The  old  com- 
pany could  not  demand  pay  for  its  franchise,  as  it  had  none,  the 
Legislature  having  revoked  it. 

There  is  nothing  in  the  Constitution  of  Massachusetts  like  the 
New  York  provision  putting  the  grant  of  street  railway  franchises 
into  the  hands  of  the  city  beyond  the  reach  of  the  Legislature. 
(See  the  Broadway  Surface  Railway  case  infra.)  The  local  con- 
sent to  track  locations  in  Massachusetts  is  a  right  derived  from 
the  Legislature,  and  revocable  by  it. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     461 

of  duplicating  the  works.  Wakefield  paid  $135,- 
000,  which  was  said  to  be  $50,000  more  than  the 
works  were  worth  on  the  basis  of  the  cost  of 
duplication. 

In  several  cases  municipalities  have  voted  heav- 
ily for  municipal  lighting,  but  have  not  carried  out 
their  purpose  when  they  discovered  how  much  it 
would  cost  to  pass  the  threshold  under  this  statute. 
An  unsuccessful  effort  has  been  made  to  amend 
the  law  so  that  a  municipality  would  only  be  re- 
quired to  pay  the  "  reasonable  cost  of  buying  and 
establishing  a  plant  of  equivalent  capacity,  count- 
ing at  its  fair  market  value  the  land  purchased."  J 

1  Such  an  amendment  passed  the  House  once,  and  came  within 
two  votes  of  passing  the  Senate.  The  Hon.  Henry  Winn,  a  high 
authority  in  this  matter,  says  that  a  city  ought  not  to  be  required 
to  pay  for  its  own  patronage.  The  "  fair  market  value  for  the 
purposes  of  its  use  "  on  the  basis  of  "  actual  earnings  "  means  the 
value  of  the  privilege  of  making  light  at  50  or  100  per  cent  profit, 
if  the  company  is  making  that.  "To  compel  the  people  to  pat- 
ronize a  monopolist,  and  to  confer  also  on  the  monopolist  the  right, 
when  the  people  seek  to  supply  themselves,  to  extort  from  them 
pay  for  the  very  patronage  they  are  forced  to  give  him,  as  if  he 
had  a  vested  right  in  it,  when  he  got  his  monopoly  for  nothing,  is 
gross  tyranny.  ...  If  the  people  of  a  city  can  revoke  a  franchise, 
or  let  in  a  competitor  without^iaying  the  private  company,  why 
should  they  be  mulcted  when  they  do  not  revoke  the  franchise, 
but  only  compete?  .  .  .  One  of  the  monopolist's  risks  was  that 
the  Legislature  would  authorize  public  plants." 

"What  ought  the  people  to  pay?  Not  for  the  business  they 
have  been  forced  to  give,  or  the  monopoly  got  from  them  for  noth- 
ing, but  for  what  they  get  in  tangible  property  and  private  rights 
not  derived  free  from  the  public  —  at  a  liberal  price.  We  are  will- 
ing to  give  the  companies  for  their  old  machinery  the  cost  of  "new 
that  will  do  equal  work,  for  their  old  and  rusted  pipes  the  cost  of 


462  MUNICIPAL  MONOPOLIES. 

When  a  town  in  Massachusetts  intends  to  estab- 
lish public  water-works,  if  an  existing  local  water 
company  desires  to  sell  to  the  town,  and  the  town 
and  company  cannot  agree  on  the  price,  it  is  cus- 
tomary for  the  Legislature  to  provide  that  three 
commissioners  shall  be  chosen  who  shall  fix  the 

laying  new  ones.  Thus  the  wear  and  tear  and  decay  and  deprecia- 
tion is  made  up  to  them  in  excess  of  what  the  property  is  really 
worth . ' ' 

"  This  price  is  enough  ;  for  it  is  simply  a  matter  of  grace,  and 
not  of  right,  that  the  public  are  forced  to  buy." 

"  It  is  enough,  even  if  the  monopolist  has  a  vested  right  to  he 
paid  for  his  business.  For  the  State  is  morally  bound  to  so  regu- 
late his  charges  that  he  shall  not  make  more  than  the  average  profit 
of  his  neighbor  under  competition." 

"  When  the  owner  of  a  cotton-mill  can  get  for  his  mill,  and  for 
his  old  and  worn  machinery,  the  cost  of  new,  he  has  got  more  than 
the  real  capital  he  had  in  these  items.  He  would  be  glad  to  get  it 
without  asking  pay  for  the  dam  that  washed  away  ten  years  be- 
fore. He  can  take  it,  and  get  with  it  the  ordinary  returns  of  capi- 
tal in  any  other  investment  he  chooses.  So  can  the  manufacturer 
of  light." 

This  argument  is  very  strong,  and  yet  the  case  is  by  no  means 
clear.  To  pay  for  the  franchise  on  the  basis  of  present  earnings  is 
to  pay  for  a  value  largely  due  in  many  cases  to  unjust  charges. 
Such  a  rule  puts  a  premium  on  fraud  and  extortion.  To  pay  the 
market  value  of  franchises  is  to  pay  the  market  value  of  watered 
and  fictitious  stocks.  This  is  manifestly  unfair.  On  the  other 
hand,  multitudes  of  people  have  Ibught  these  stocks  under  the 
sanction  of  existing  law.  To  pay  only  the  cost  of  duplicating  the 
plant  will  "  confiscate"  the  value  of  these  investments.  Suppose 
the  franchise  was  a  gift,  may  one  take  back  a  gift  at  will,  even 
though  it  may  have  been  sold  to  third  parties  for  value  ?  Sup- 
pose the  rates  are  too  high;  whose  fault  is  it?  l^Iany  a  stock- 
holder might  be  willing  to  reduce  rates  as  the  business  grows, 
but  cannot  make  his  views  prevail.  The  public  could  reduce  the 
rates,  but  has  not  done  so.  As  between  such  stockholders,  whose 
"agents  "  (beyond  their  control  perhaps)  have  not  done  their  duty 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     463 

value  without  allowance  for  franchise.  The  fol- 
lowing are  examples:  — 

Newburyport:  Acts  of  1894,  chap.  474,  sec.  1, 
closing  sentence :  — 

"  Such  value  shall  be  estimated  without  enhancement  on 
account  of  future  earning  capacity  or  good-will,  or  on  ac- 
count of  franchise  of  said  company." 

as  to  lowering  rates,  and  the  public,  whose  "  agents  "  (also  beyond 
any  easy  and  efficient  control)  have  neglected  their  duty  as  to 
lowering  rates — as  between  these  two,  which  one  should  bear  the 
loss?  The  change  is  for  the  benefit  of  the  whole  people.  The 
public  is  better  able  to  bear  the  loss  than  many  of  the  stock- 
holders who  invested  their  money  under  public  sanction ;  it 
seems,  therefore,  no  more  than  fair  that  the  city  should  pay  the 
market  value  of  the  property,  franchise  and  all.  Where  no  power 
of  revoking  the  franchise  has  been  reserved,  payment  of  the  mar- 
ket value  of  the  franchise  is  required  by  existing  constitutional 
guaranties.  In  such  cases  there  is  no  way  but  to  exercise  the 
power  to  compete,  or  the  power  to  reduce  rates,  or  else  pay  for 
the  water.  There  may  seem  to  be  little  difference  in  ethics  be- 
tween the  method  of  squeezing  out  the  water  by  reduction  of 
rates,  and  then  taking  the  property  at  fair  value,  and  the  method 
of  taking  the  property  at  once  at  the  same  fair  value.  In  fact, 
however,  there  is  a  great  difference,  ethically  as  well  as  practi- 
cally, between  a  proceeding  which  accords  with  the  habits  of 
thought  and  the  settled  laws  of  the  country,  and  a  proceeding 
which  violates  those  habits  and  laws. 

This  question  of  compensation  for  franchises  is  one  of  the  most 
difficult  in  the  whole  range  of  municipal  law.  Happy  is  the  city 
or  town  that  can  solve  the  problem  by  keeping  its  franchises  from 
the  start,  or  by  putting  conditions  in  franchise  grants  securing 
fair  rates  and  good  service,  and  providing  that  after  10  or  20  or  30 
years  the  whole  property,  franchise,  and  physical  plant  in  good 
condition,  shall  become  public  without  further  compensation. 
This  method  is  frequently  used  abroad,  and  a  similar  plan  has 
been  adopted  by  Springfield,  111.,  to  obtain  a  municipal  lighting- 
plant. 


464  MUNICIPAL  MONOPOLIES. 

Gloucester:  Acts  of  1895,  chap.  451,  sec.  16, 
closing  sentence :  — 

"  Such  value  shall  be  estimated  without  enhancement  on 
account  of  future  earning  capacity  or  future  good-will,  or  on 
account  of  the  franchise  of  said  company." 

Stoneham:  Acts  of  1897,  chap.  473,  sec.  13, 
near  the  end :  — 

"  Who  shall  determine  the  fair  value  of  said  property 
without  allowance  for  past,  present,  or  future  earnings  or  earn- 
ing capacity,  good-will,  or  any  franchise  or  privilege  of  said 
company." 

Where  a  railway  company  is  operating  under 
franchises  entirely  subject  to  legislative  control, 
and  its  charter  is  repealed  for  abuse  according 
to  a  power  reserved  therein,  it  has  been  held  that 
the  road  becomes  the  property  of  the  State  without 
compensation  being  paid  for  it.1 

But  where  a  railway  company,  though  organized 

i  Erie  &  North  East  Rd.  Co.  vs.  Casey,  26  Pa.  St.,  287,  300, 
302,  307-8,  324-5.  The  charter  provided  that  "If  the  said  com- 
pany abuse  or  misuse  any  of  the  privileges  hereby  granted,  the 
Legislature  may  resume  the  rights  granted  to  said  company." 
The  charter  was  repealed  for  abuse;  and  the  defendant  was  ap- 
pointed by  the  governor  (under  legislative  authority)  to  take  pos- 
session "  of  the  road  the  company  had  built,  and  keep  iff  in  good 
running  order  for  the  use  of  the  public."  The  company  said  this 
was  confiscation,  taking  private  property  for  public  use  without 
compensation,  in  violation  of  the  Federal  Constitution.  But  the 
court  said,  No.  "  This  act  takes  nothing  but  the  road.  Is  that 
private  property?  Certainly  not!  It  is  a  public  highway,  sol- 
emnly devoted  by  law  to  public  use.  When  the  lands  were  taken 
to  build  it  on,  they  were  taken  for  public  use ;  otherwise  they 
could  not  have  been  taken  at  all.    It  is  true  that  the  plaintiffs 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     465 

under  legislative  authority,  constructs  and  operates 
its  tracks  in  the  streets  of  a  city  by  virtue  of  a 
franchise  derived  from  the  city  government,  act- 
ing, not  under  legislative  permission,  but  by  ex- 
clusive authority  conferred  by  the  Constitution,  a 

(Ry.  Co.)  had  a  right  to  tolls  from  all  who  traveled  or  carried 
freight  upon  it,  but  that  was  a  mere  franchise,  —  a  privilege 
derived  entirely  from  the  charter,  and  it  was  gone  when  the  char- 
ter was  repealed.  .  .  .  When  the  franchise  ceases,  the  highway  is 
thrown  back  on  the  hands  of  the  State.  .  .  .  She  may  renew  the 
franchise,  give  it  to  some  other  person,  exercise  it  herself,  or  de- 
clare the  highway  open  and  free  to  all  people.  If  the  railway 
itself  was  the  private  property  of  the  stockholders,  then  it  remains 
theirs,  and  they  may  use  it  without  a  charter  as  other  people  use 
their  own  —  run  it  on  their  own  account  —  charge  what  tolls  they 
please  —  close  it  or  open  it  when  they  think  proper — and  disre- 
gard every  interest  but  their  own.  The  repeal  of  charters  on  such 
terms  would  be  courted  by  every  railroad  company  in  the  State ; 
for  it  would  have  no  effect  but  to  emancipate  them  from  the  con- 
trol of  the  law,  and  convert  the  limited  into  a  broad,  unbounded 
license.  On  this  principle  a  corporation  would  be  rewarded,  but 
never  punished  for  misconduct.  .  .  .  Railroads  made  by  the  au- 
thority of  the  Commonwealth  upon  lands  taken  under  her  right 
of  eminent  domain,  and  established  by  her  laws  as  thoroughfares, 
are  her  highways.  No  corporation  has  any  property  in  them, 
though  corporations  may  have  franchises  annexed  to  and  exercis- 
able within  them.  .  .  .  Railroads  are  public  highways.  On  this 
principle  alone  we  decided  that  municipal  subscriptions  were 
valid.  On  this  principle  alone  can  lands  and  materials  be  seized 
to  make  them.  .  .  .  On  this  principle  alone  we  have  always  held 
that  no  individual  or  corporation  can  possibly  have  any  right  or 
privilege  connected  with  them  except  what  the  law  has  expressly 
conferred.  .  .  .  By  the  charter,  and  by  the  charter  alone,  were 
the  plaintiffs  authorized  to  interfere  with  the  road  at  all ;  the  re- 
peal necessarily  took  that  authority  away.  A  public  highway 
is  not  private  property  any  more  than  a  public  office.  .  .  .  The 
removed  officer  has  no  right  to  keep  the  records  etc.,  and  the 
removed  company  has  no  right  to  keep  the  road."  This  Erie 
case  is  one  of  the  most  remarkable  in  the  reports. 


466  MUNICIPAL   MONOPOLIES. 

revocation  of  charter  by  the  Legislature  does  not 
destroy  the  property  rights  in  the  city  streets  aris- 
ing under  the  city  grant.1 

IY.    PREVENTION. 

The  Right  to  Prohibit  Discrimination,  Monopoly, 
and   Other  Abuses. 

Municipal  charters  usually  contain  express  au- 
thority to  suppress  nuisances,  and  prohibit  injurious 

1  People  vs.  O'Brien,  111  N.  Y.,  1,  the  Broadway  Surface  Rail- 
way Case.  The  Broadway  Co.  was  organized  under  legislative 
Act ;  hut  its  street  rights  could  only  he  ohtained  from  the  city, 
because  the  Constitution  of  New  York  requires  consent  of  the 
municipal  authorities  to  the  construction  and  operation  of  street 
railways.  The  company  secured  its  street  franchise  by  the  ex- 
penditure of  half  a  million  in  bribing  aldermen,  paying  lobby 
expenses,  etc.  Upon  proof  of  this  corruption,  the  Legislature  re- 
voked the  company's  charter,  and  the  Attorney  General  claimed 
that  all  street  rights  were  forfeited.  But  the  court  said,  No. 
The  city,  not  the  State,  had  granted  the  street  franchise.  The 
city  had  not  reserved  any  right  of  revocation,  and  the  corrupt 
means  by  which  the  street  privileges  had  been  obtained  were  not 
in  evidence  before  the  court;  "  they  are  not  involved  in  this  case, 
and  have  no  bearing  on  the  questions  presented  for  discussion  by 
the  record.  They  were  neither  alleged  in  the  complaint,  sup- 
ported by  proof,  or  presented  in  the  arguments  of  counsel."  The 
mortgages  and  bonds  of  the  company  had  been  sold  to  persons 
ignorant  of  any  taint  in  them.  The  railway  corporation  ceases  to 
exist  on  withdrawal  of  its  charter;  but  its  street  rights  being 
beyond  legislative  creation  or  control  remain  in  the  hands  of  its 
officers  as  trustees  for  the  mortgagees,  bondholders,  creditors,  and 
users  of  the  road,  and  statutes  expressly  providing  for  taking  away 
such  street  rights  on  dissolution  of  the  company  are  unconstitu- 
tional and  void.  The  Legislature  cannot  take  away  property 
rights  granted  by  the  city  in  perpetuity  under  constitutional 
authority  independent  of  and  above  the  Legislature. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     467 

conduct  of  various  sorts.  Sometimes  the  law  goes 
into  considerable  detail.  For  example,  a  recent 
statute  in  Montana  provides  that  a  municipal  coun- 
cil may  regulate  or  prohibit  the  wearing  of  hats 
and  bonnets  in  theaters,  churches,  and  other  places 
of  amusement.  It  is  not  unusual  to  require  con- 
sent of  the  local  authorities  before  a  street-railway 
company  can  build  its  tracks  in  the  streets.1  Some- 
times the  same  rule  is  extended  to  gas  and  water 
pipes,  electric  light,  telegraph,  and  telephone  wires, 
etc.2  These  constitutional  and  statutory  rights  to 
appoint  and  revoke  locations  and  control  street 
franchises,  or  to  grant  them  on  such  terms  as  the 
municipality  may  deem  proper,  are  of  great  im- 
portance, as  a  partial  recognition  of  the  right  of 
local  self-government,  and  an  aid  in  checking  cor- 
ruption and  undue  preponderance  of  corporate 
power. 

The  most  imposing  efforts  of  industrial  law  in 
the  way  of  prevention  relate  to  discrimination  and 
monopoly.  The  courts  have  built  up  a  rule  against 
discrimination  by  common  carriers,  innkeepers, 
etc.,  and  statutes  enacted  by  States  and  nation  have 

1  This  is  required  by  the  Constitution  in  New  York,  West  Vir- 
ginia, Illinois,  Missouri,  Nebraska,  South  Dakota,  South  Carolina, 
Georgia,  Alabama,  Kentucky,  Idaho,  Colorado,  and  Wyoming. 
Even  in  States  like  Massachusetts,  where  the  Constitution  is  silent 
on  the  subject,  it  is  customary  for  the  Legislature  to  give  munici- 
palities a  veto  power  in  respect  to  street  locations  and  franchises. 

2  See  the  Constitutions  of  South  Carolina,  South  Dakota,  Ken- 
tucky, and  Wyoming. 


468  MUNICIPAL  MONOPOLIES. 

emphasized  the  duty  of  impartiality  on  the  part  of 
those  engaged  in  public  or  quasi-public  service.1 

For  centuries  contracts  in  restraint  of  trade  or 
tending  to  a  monopoly,  have  been  null  and  void  in 
the  courts  as  against  public  policy.  For  example, 
an  exclusive  grant  by  a  railway  of  a  right  of  way 
to  a  telegraph  company  is  void.2  So  an  exclusive 
contract  of  right  of  way  over  certain  land  for  an 
oil  pipe-line  is  void.3  A  combination  of  coal  com- 
panies or  of  railways  and  mining  companies  to  fix 
prices  and  prevent  competition  is  void  as  a  con- 
spiracy against  the  public.4  An  agreement  by 
which  gas  companies  divide  up  a  city,  each  com- 

1  See  Peoria,  &c,  Ry.  Co.  vs.  Coal  Valley  Mining  Co.,  68  111., 
489,  declaring  void  an  agreement  by  which  the  railway  was  to  pay 
the  C.  V.  mining  company  50  cents  a  ton  on  all  coal  it  carried  for 
any  other  shipper.  And  Handy  vs.  Cleveland  &  Marietta  R.  Co., 
31  Fed.  Rep.  689,  the  "Rice  case,"  in  which  Judge  Baxter  con- 
demned an  agreement  by  which  the  railway  undertook  to  carry 
oil  for  the  Standard  Co.  at  10  cents  a  barrel,  charge  rival  shippers 
35  cents  a  barrel,  and  pay  the  Standard  Oil  Co.  25  cents  out  of  each 
35  cents  collected  from  rival  shippers.  Such  discrimination  "  is 
justly  abhorrent  to  all  fair  minds.  No  such  dangerous  power  can 
be  tolerated.  .  .  .  Making  one*  shipper  pay  tribute  to  his  rival, 
thereby  enriching  one  and  impoverishing  another,  is  a  gross,  illegal, 
and  inexcusable  abuse  of  a  public  trust,  that  calls  for  the  severest 
reprehension." 

2  Western  Union  Teleg.  Co.  vs.  American  Union  Teleg.  Co., 
65  Ga.,  160. 

3  West  Virginia  Trans.  Co.  vs.  Ohio  River  Pipe  Line  Co.,  22 
"W.  Va.,  600,  626. 

4  Morris  Run  Coal  Co.  vs.  Barclay  Coal  Co.,  68  Pa.  St.,  173, 186 ; 
Stockton  vs.  Central  Ry.  of  N.  J.,  Port  Reading  Ry.  Co.  and  the 
Phil.  &  Reading  Rd.  Co.,  50  N.J.  Eq.  52  (1892)  Reading  Coal 
Combine, 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     469 

pany  agreeing  to  keep  within  a  specified  district, 
is  void.1  A  control  of  several  gas  companies  in 
the  same  city  resulting  from  the  purchase  by  one 
company  of  a  majority  of  the  stock  of  each  of  four 
other  companies  is  unlawful.2  A  gas  combine  is 
void  though  it  causes  only  a  partial  restraint  of 
trade.3  The  Lumber  Combine,4  the  Nail  Trust,5 
the  Sugar  Trust,6  the  Whisky  Trust,7  the  Match 
Trust,8  and  the  Standard  Oil  Trust,9  have  all  been 
declared  unlawful,  and  their  agreements  null  and 

1  Chicago  Gas  Light  Co.  vs.  People's  Gas  Light  Co.,  121  111., 
530. 

2  People  vs.  Chicago  Gas  Trust,  130  111.,  268. 

3  Gibhs  vs.  Consolidated  Gas  Co.  of  Baltimore,  130  U.  S.,  396. 

4  Lumber  Co.  vs.  Hayes,  18  Pac.  Rep.,  391  (Cal.). 

5  Bramkamp  Case,  TJ.  S.  Cir.  Court,  Indianapolis,  Nov.,  1896. 
The  Wire  Nail  Trust  succeeded  in  raising  prices  from  80  cents  to 
$2.50  a  keg  wholesale,  resulting  in  a  profit  of  several  millions  to 
the  trust.  Nails  were  retailing  at  $3.75  to  $4.00  a  keg,  while 
farmers  were  selling  corn  at  12  cents  and  oats  at  8  to  10  cents  a 
bushel  —  40  bushels  of  oats  for  a  keg  of  nails  that  probably  cost,  in 
labor  and  capital,  about  as  much  as  four  bushels  of  oats.  The  trust 
and  its  allies  did  not  hesitate  to  break  contracts  and  wreck  ma- 
chines in  their  efforts  to  prevent  competition.  (See  The  Iron  Age, 
Oct.  22,  Nov.  19,  and  Dec.  3,  1896,  pp.  795,  988, 1106,  1108.)  The 
destruction  of  property  to  break  down  competition  is  a  familiar 
thing  in  the  history  of  the  Standard  Oil  Combine.  (See  Lloyd's 
"  Wealth  Against  the  Commonwealth,"  and  the  public  docu- 
ments cited  therein.) 

6  People  vs.  Refining  Co.,  7  N.  Y.  Supplement,  406  (Sugar 
Trust)  &  U.  S.  vs.  E.  C.  Knight  Co.,  156  U.  S.,  1,  11. 

"  State  vs.  Neb.  Distilling  Co.,  29  Neb.,  700  (1890),  Whisky 
Trust. 

8  Richardson  vs.  Buhl,  77  Mich.,  632  (1889).  Match  Trust. 

9  State  vs.  Standard  Oil  Co.,  49  Ohio  St.,  137;  30  N.  E.  Rep., 
279. 


470  MUNICIPAL   MONOPOLIES. 

void,  on  the  broad  ground  that  whatever  tends  to 
monopoly  is  against  public  policy.1 

In  the  Chicago  Gas  Trust  case  the  Supreme 
Court  of  Illinois  said :  — 

"  The  Chicago  Gas  Trust  Company  has  purchased  a  ma- 
jority of  all  the  shares  of  stock  of  these  four  companies. 
It  was  itself  organized  with  a  capital  stock  of  $25,000,000. 
The  capital  of  the  four  companies  was  $16,984,200.  The 
control  of  the  four  companies  by  the  appellee  —  an  outside 
and  independent  corporation  —  suppresses  competition  be- 
tween them,  and  destroys  their  diversity  of  interest  and  all 
motive  for  competing.  Whatever  tends  to  prevent  compe- 
tition between  those  engaged  in  a  public  employment  or 
business  impressed  with  a  public  character  is  opposed  to 
public  policy,  and  therefore  unlawful.  Whatever  tends  to 
create  a  monopoly  is  unlawful  as  being  contrary  to  public 
policy."'2 

In  the  Baltimore  case  the  court  said :  — 

"  The  supplying  of  illuminating  gas  is  a  business  of  a 
public  nature  to  meet  a  public  necessity.  A  business  of 
such  character  presumably  cannot  be  restrained  to  any 
extent  whatever  without  prejudice  to  the  public  interest, 
and  courts  decline  to  enforce  or  sustain  contracts  imposing 
such  restraint,  however  partial."  8 

1  In  the  case  of  corporations  uniting  to  form  a  trust  or  capital- 
istic monopoly,  there  is  an  additional  ground  of  decision  in  the 
fact  that,  in  entering  the  trust  and  giving  over  their  powers  to 
trustees,  the  companies  or  their  officers  act  ultra  vires.  See  the 
Sugar  Trust  cases  in  22  Abbott,  N.  C,  164;  54  Hun.,  354;  121 
N.Y.,  582. 

2  Citing  2  Add.     Cont.  743  ;.ll  Coke,  84  b. 

3  The  fundamental  legal  principles  applicable  to  city  monopo- 
lies are,  for  the  most  part,  the  same  as  those  which  apply  to  other 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     471 

In  addition  to  common  law  decisions  we  have  a 
great  deal  of  legislation  against  trusts  and  monop- 

monopolies,  and  some  of  the  clearest  and  most  forceful  statements 
of  these  principles  occur  in  decisions  not  directly  concerned  with 
city  monopolies.  For  example,  in  the  Diamond  Match  case  (77 
Mich.,  632)  Chief  Justice  Sherwood  said :  "  The  supply  of  the  arti- 
cle and  its  price  are  made  to  depend  on  the  action  of  a  half-dozen 
individuals,  governed  by  a  single  motive  or  purpose,  which  is  to 
accumulate  money  regardless  of  the  wants  or  necessities  of  over 
sixty  millions  of  people.  Monopoly  in  trade  or  in  any  kind  of 
business  in  this  country  is  odious  to  our  form  of  government.  .  .  . 
Its  tendency  is  destructive  of  free  institutions,  and  repugnant  to 
the  instincts  of  a  free  people,  and  contrary  to  the  whole  scope  and 
spirit  of  the  Federal  Constitution.  Indeed,  it  is  doubtful  if  free 
government  can  long  exist  in  a  country  where  such  enormous 
amounts  of  money  are  allowed  to  be  accumulated  in  the  vaults  of 
corporations  to  be  used  at  discretion  in  controlling  the  property 
and  business  of  the  country  against  the  interest  of  the  people  for 
the  personal  gain  of  a  few  individuals.  All  combinations  among 
persons  or  corporations  for  the  purpose  of  raising  or  controlling 
the  prices  of  merchandise  are  monopolies  and  intolerable,  and 
ought  to  receive  the  condemnation  of  all  courts.  It  is  no  answer 
to  say  that  this  monopoly  has  in  fact  reduce'd  the  price  of  friction 
matches.  That  policy  may  have  been  necessary  to  crush  compe- 
tition. The  fact  remains  that  it  rests  in  the  discretion  of  this 
company  at  any  time  to  raise  the  price  to  an  exorbitant  degree." 
Pp.  657-8. 

In  the  Standard  Oil  case  (49  Ohio  St.,  137)  the  Supreme  Court 
of  Ohio  said  that  the  object  of  the  trust  was  to  "  establish  a  vir- 
tual monopoly"  of  the  oil  business,  and  "to  control  the  produc- 
tion and  the  price  at  its  pleasure.  All  such  associations  are  void." 
As  to  the  claim  that  the  trust  had  lowered  prices,  the  court  said 
it  might  be  so,  "  but  such  is  not  one  of  the  usual  or  general  results 
of  a  monopoly ;  and  it  is  the  policy  of  the  law  to  regard,  not  what 
may,  but  what  usually,  happens.  Experience  shows  that  it  is  not 
wise  to  trust  human  cupidity  where  it  has  the  opportunity  to  ag- 
grandize itself  at  the  expense  of  others."  The  court  emphasized 
the  undemocratic  tendencies  of  monopolistic  combinations,  an 
objection  which  it  said  was  "often  overlooked,  but  none  the  less 
important."    The  following  words  of  Justice  Marshall,  and  those 


472  MUNICIPAL  MONOPOLIES. 

olies,1  and  severe  penalties  are  provided  for  those 
who  violate  the  anti-trust  laws.2     Yet  these  same 

of  the  Michigan  judge  ahove  cited,  ought  to  he  framed  in  gold, 
and  hung  in  every  court-room  and  legislative  hall  in  the  land  :  — 
"A  society  in  which  a/eio  men  are  the  employers  and  the  great 
body  are  merely  employees  or  servants,  is  not  the  most  desirable  in 
a  republic;  and  it  should  be  as  much  the  policy  of  the  law  to  mul- 
tiply the  numbers  engaged  in  independent  pursuits  or  (sharing) 
in  the  profits  of  production,  as  to  cheapen  theprice  to  the  consumer. 
Such  apolicy  would  tend  to  an  equality  of  fortunes  among  its  citi- 
zens, thought  to  be  so  desirable  in  a  republic,  and  lessen  tin- 
amount  of  pauperism  and  <■/•ime.,,  (49  Ohio  St.,  at  187.) 

1  A  State  law  prohibiting  consolidation  or  pooling  on  the  part 
of  parallel  or  competing  railroad,  telegraph,  telephone,  bridge,  or 
carrier  companies,  is  a  valid  exercise  of  the  police  power.  "  What- 
ever is  contrary  to  public  policy  or  inimical  to  the  public  interests 
is  subject  to  the  police  power  of  the  State,  and  within  legislative 
control;  and  in  the  exertion  of  such  power  the  Legislature  is 
vested  with  a  large  discretion,  which,  if  exercised  bona  fide  for 
the  protection  of  the  public,  is  beyond  the  reach  of  judicial  in- 
quiry." Louisville  &c.  Rd.  vs.  Kentucky,  161  U.S.,  677,  701 
(1895). 

2  The  common  law  principle  that  private  monopolies  are  inim- 
ical to  public  interest  is  undoubtedly  well  based,  and  its  logic 
applies  not  only  to  monopolies  of  combination,  but  to  all  industrial 
monopolies,  ".natural,"  "legal,"  or  "capitalistic."  The  true 
remedy  for  oppressive  monopoly  of  either  sort  is  honest  public 
administration  of  it  for  the  common  benefit.  Monopoly  means 
union,  economy,  and  better  service  on  the  inside,  but  probable 
antagonism  to  public  interest  on  the  outside,  and  insufficient  atten- 
tion to  the  rights  of  labor,  so  long  as  the  monopoly  is  in  private 
hands.  The  way  to  keep  the  benefits  and  get  rid  of  the  evils  of 
monopoly  is  to  make  it  public  under  good  civil  service  regula- 
tions. So  far,  however,  at  least  in  respect  to  monopolies  of  com- 
bination, the  law  has  aimed  at  destruction.  The  success  of  this 
policy  has  been  small.  Trusts  and  combinations  have  been  re- 
peatedly declared  null  and  void,  and  dissolved.  But  secret  com- 
bines, or  solid  unions  in  corporation  form,  have  taken  their  places, 
and  the  monopolies  still  exist.  Moreover,  it  has  been  found  ex- 
ceedingly difficult  to  obtain  evidence  under  either  the  Interstate 


TUE  LEGAL   ASPECTS    OF  MONOPOLY.     473 

legislative  bodies  that  pass  strong  laws  against 
monopolies  by  combination,   pass   also  numerous 

Commerce  Act  of  1887,  or  the  Anti- Trust  Law  of  July  2,  1890,  be- 
cause the  courts  will  not  compel  a  witness  to  testify  to  anything 
that  may  subject  him  to  a  criminal  prosecution  (see  decision  that 
N.Y.  Law,  1897,  chap.  383,  §  7,  is  unconstitutional  on  this  ground. 
Matter  of  Attorney  General,  21  Misc.  Rep.,  101 ;  case  further  con- 
sidered, but  not  on  this  point,  22  App.  Div.  285;  155  N.  Y.,  441). 

The  Federal  Act  of  1890  is  intended  "to  protect  trade  and 
commerce  against  unlawful  restraints  and  monopolies."  Its  pro- 
visions apply  "to  all  contracts  in  restraint  of  interstate  or  foreign 
trade  or  commerce  without  exception  or  limitation,  and  are  not 
confined  to  those  in  which  the  restraint  is  unreasonable;  "  where- 
fore a  contract  between  railroads  in  restraint  of  such  trade  is  pro- 
hibited, though  it  was  only  for  the  purpose  of  effecting  traffic  rates 
for  the  transportation  of  persons  and  property.  (IT.  S.  vs.  Trans- 
Missouri  Freight  Association,  166  U.  S.,  290,  March  22,  1897.)  So 
"  contracts  which  operate  as  a  restraint  upon  the  soliciting  of 
orders  for,  and  the  sale  of  goods  in,  one  State,  to  be  delivered 
from  another,"  are  prohibited  by  tbe  said  Act.  (U.  S.  vs.  Addy- 
ston  Pipe  &  Steel  Co.,  85  Fed.  Rep.,  271,  Feb.  8,  1898.)  But  a 
combination  for  the  manufacture  of  sugar,  not  involving  the 
restraint  of  sales  of  goods  to  be  delivered  across  State  lines,  does 
not  violate  said  Act.  (U.  S.  vs.  E.  C.  Knight  Co.,  156  U.  S.,  1,  case 
against  the  Sugar  Trust.) 

The  Trans-Missouri  case  supra  has  just  been  reaffirmed  by  the 
United  States  Supreme  Court  in  the  Joint  Traffic  Association 
Case  (Oct.,  1898).  About  three  years  ago  31  railways  joined  in  an 
association  "  to  establish  and  maintain  reasonable  and  just  rates, 
fares,  rules,  and  regulations  on  State  and  interstate  traffic."  The 
Supreme  Court  takes  the  ground  that  railway  pooling  agreements 
are  void  without  regard  to  their  form,  any  combination  to  regulate 
and  control  rates  is  unlawful.  The  railway  lawyers  attacked  the 
Sherman  Anti-Trust  Law,  but  the  court  sustained  its  validity. 
Perhaps  the  most  noteworthy  sentence  in  this  important  opinion 
is  the  following :  "  The  business  of  a  railroad  carrier  is  of  a  public 
nature,  and  in  performing  it  the  carrier  is  also  performing  to  a 
certain  extent  a  function  of  government."  Why  should  functions 
of  government  be  delegated  to  corporations  to  be  performed  for 
private  gain  ? 


474  MUNICIPAL  MONOPOLIES. 

acts  granting  monopolies  as  bad  or  worse,  in  the 
shape  of  franchises  and  contracts ;  and  the  same 
courts  that  declare  whatever  tends  to  monopoly 
null  and  void  (and  cite  Darcey  vs.  Allen,  11  Coke 
84  b,  and  7  Bac.  Abr.  22,  authorities  dealing  with 
franchises  granted  by  Queen  Elizabeth,  and  stating 
that  all  grants  creating  monopoly  are  void  by  the 
common  law),  —  these  same  courts  sustain  the  said 
legislative  bodies  in  the  creation  of  monopolies. 

According  to  these  decisions,  a  gas  or  street  rail- 
way monopoly  by  combination  is  inherently  bad; 
but  the  same  monopoly,  by  act  of  the  Legislature 
and  the  city  council,  is  perfectly  good.  A  private 
monopoly  by  agreement  in  New  York  or  Phila- 
delphia is  absolutely  void,  because  private  monop- 
oly is  in  its  very  nature  contrary  to  public  policy  j1 
but  a  private  monopoly  by  agreement  in  the  State 
House  at  Albany,  or  in  the  Capitol  at  Washington, 
is  absolutely  good. 

The  truth  is,  that  decisions  sustaining  grants  of 
franchises  or  other  monopolistic  privileges  are  con- 
trary to  the  fundamental  principles  of  free  insti- 
tutions, democratic  government,  and  Anglo-Saxon 
jurisprudence.  No  Legislature  or  Congress  ever 
had  a  right  to  grant  a  monopoly,  or  a  franchise 
that  practically  amounts   to  a  monopoly.     What 

1  Morris  Run  Coal  Co.  vs  Barclay  Coal  Co.,  68  Pa.  St.,  173; 
Craft  vs.  McConoghy,  79  111.,  340  at  350;  Salt  Co.  vs.  Guthrie,  35 
Ohio  St.,  Co'li;  and  cases  cited  ahove. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     475 

the  sovereign  power  of  Queen  Elizabeth  could  not 
accomplish  against  the  people's  interests  is  surely 
beyond  the  rightful  power  of  legislators  elected  to 
serve  the  people's  interests.  A  private  monopoly 
is  just-as  much  against  public  policy  when  formed 
by  grant  as  when  formed  by  combination,  —  more 
so  if  anything,  because  of  the  corruption  of  the 
government  so  often  incident  to  such  grants.  The 
result  is,  that  justice,  public  policy,  and  the  estab- 
lished principles  of  our  jurisprudence,  permit  no 
private  monopoly,  either  by  combination  or  by 
grant,  wherefore  monopoly,  wherever  necessary  in 
the  nature  of  the  case,  or  for  the  sake  of  economy, 
must  be  public  and  not  private.  That  every 
water,  gas,  electric-light,  transit,  telegraph,  and 
telephone  franchise  should  be  owned  and  operated 
by  the  public  is  a  clear  deduction  from  principles 
of  justice  and  public  policy  firmly  established  in 
our  law  for  the  last  five  hundred  years. 

A  franchise  establishing  a  virtual  monopoly,  and 
relating  to  a  practical  necessity  of  civilized  life, 
like  transportation,  light,  water,  means  of  com- 
munication, etc.,  involves  a  power  to  exact  tribute 
from  the  community,1  a  power  substantially  equiv- 
alent to  the  privilege  of  levying  taxes  for  private 
purposes,  which  is  beyond  the  authority  of  any 
legislative  body  in  a  free  country.2     The  Legis- 

1  Bradley,  J.,  in  Sinking  Fund  case,  99  U.  S.,  700,  747. 

2  The  government  cannot  levy  taxes  nor  take  private  property 


476  MUNICIPAL   MONOPOLIES. 

lature  cannot  delegate  a  power  it  does  not  possess, 
cannot  do  indirectly  through  a  corporate  franchise 
what  it  has  no  right  to  do  directly ;  wherefore,  on 
the  clearest  principles  of  law,  every  monopolistic 
franchise  our  legislators  have  granted  should  have 
been  held  absolutely  void.  Such  franchises  not 
only  involve  taxation  for  private  purposes,  but 
taxation  without  representation  —  the  people  who 
pay  tribute  to  the  street-railway,  gas  and  electric 
companies,  are  not  represented  in  the  deliberations 
of  those  bodies.  It  is  a  curious  spectacle,  this  of 
a  government  choking  monopolies  with  one  hand, 
and  granting  them  in  lavish  abundance  with  the 
other,  declaring  all  the  while  that  monopolies  are 
contrary  to  public  policy,  and  passing  laws  to 
destroy  them,  while  in  the  very  same  hall,  and 
perhaps  in  the  very  same  hour,  still  other  laws  are 
passed  to  create  them. 

in  any  way  except  for  a  public  purpose  (20  Wall.,  664;  106  U.  S., 
487  ;  2  Dill.,  353).  And  taxation  for  the  benefit  of  an  enterprise  in 
private  control  is  not  for  a  public,  but  for  a  private  purpose,  and  is 
beyond  tbe  spbere  of  legislative  power  (27  la.,  51;  58  Me.,  590). 

It  makes  no  difference  wbetber  the  Constitution  expressly 
limits  the  power  of  the  Legislature  to  public  purposes  or  not.  The 
provisions  of  the  Constitution  are  not  the  only  limitations  on  legis- 
lative power.  There  are  others  that  inhere  in  the  very  substance 
of  republican  institutions,  implied  reservations  which  grow  out  of 
the  essential  nature  of  all  free  governments,  and  underlie  the  con- 
stitutions, being  necessary  to  accomplish  the  purposes  for  which 
the  constitutions  were  established.  (U.  S.  Supreme  Court  in  20 
Wallace  supra;  Judge  Dillon  in  27  la.,  51,  25  la.,  540;  see  also 
39  Pa.  St.,  73.) 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     477 

V.    EEGTJLATION. 

The  Hight  to  Regulate  Rates  and  Services. 

1.  A  Legislature  may,  within  the  borders  of  its 
own  State,  regulate  the  use  of  property  and  the 
prices  charged  for  transportation  or  other  service 
which  is  "  clothed  with  a  public  interest."  1     This 

1  Any  one  who  enjoys  a  special  privilege  or  a  virtual  monop- 
oly, or  has  a  business  that  is  affected  with  a  public  interest,  may 
be  regulated.  (Cooley  on  Const.  Lims.,  734-7;  Munn  vs.  People, 
69  111.,  80,  91.    Munn  vs.  111.,  91  U.  S.,  113.) 

"  Affected  with  a  public  interest  "  means 

(a)  Any  business  that  is  not  of  common  right,  but  permitted  by 
public  authority. 

(b)  When  any  exclusive  privilege  is  granted. 

(c)  Where  the  public  grants  special  assistance,  use  of  public 
property,  etc.     (Cooley,  738.) 

"  Property  becomes  clothed  with  a  public  interest  when  used 
in  a  manner  to  make  it  of  public  consequence,  and  affect  the 
community  at  large. 

"  When  therefore  one  devotes  his  property  to  a  use  in  which  the 
public  has  an  interest,  he  in  effect  grants  to  the  public  an  interest 
in  that  use,  and  must  submit  to  be  controlled  by  the  public  for 
the  common  good  to  the  extent  of  the  interest  he  has  thus  created." 
(C.  J.  Waite,  91  V.  S.,  126,  Munn  case;  Grain  Warehouses.) 

"  Turnpikes,  railroads,  telephones,  telegraphs,  are  impressed 
with  a  public  character,  and  as  such  are  subject  to  general  police 
regulations."    (Elliott  on  Roads  and  Streets,  p.  59.) 

"  When  a  business  becomes  a  practical  monopoly,  to  which  the 
citizen  is  compelled  to  resort,  and  by  means  of  which  tribute  can 
be  exacted  from  the  community,  it  is  subject  to  regulation  by  the 
legislative  power."  (Bradley,  J.,  interpreting  the  Munn  case  in 
Sinking  Fund  case,  99  U.  S.,  700,  747.) 

That  monopoly  is  not  the  only  justification  of  regulation  is 
shown  by  the  case  of  bakers,  millers,  hackmen,  etc.  The  use  of 
property  or  any  other  element  of  conduct  may  be  regulated  to 


478  MUNICIPAL  MONOPOLIES. 

right  of  regulation  is  incident  to  what  is  known  as 
the  "  police  power  "  of  the  State,  —  the  power  to 
provide  for  the  safety,  health,  comfort,  prosperity, 
and  morals  of  its  people.  In  the  exercise  of  such 
power,  it  has  been  customary  from  time  immemo- 
rial in  England,  and  in  this  country  from  its  first 
colonization,  to  regulate  hackmen,  draymen,  ferry- 
men, bakers,  millers,  wharfingers,  warehousemen, 
innkeepers,  common  carriers,  etc. ;  and  in  so  doing 
to  determine  the  accommodations  that  shall  be  fur- 
nished, the  articles  that  shall  be  sold,  the  charges 
that  shall  be  made,  and  any  other  matters  re- 
lated to  the  business  in  which  the  public  has  an 
interest.1 

2.  The  Legislature  may  act  directly  or  through 
a  commission,  or  in  case  of  local  concerns  may 
delegate  the  power  of  regulation  to  municipalities. 
This  is  done  to  a  greater  or  less  extent  by  every 
State  in  the  Union  in  respect  to  hackmen,  inn- 
keepers, owners  of  theaters,  saloons,  gambling- 
houses,  railways,  telegraph  and  telephone  lines, 
gas,  water,  electric  light,  and  other  street  fran- 
chises. Sometimes,  as  in  Missouri  and  California, 
laws  are  passed  which  give  the  whole  control  of 

whatever  extent  the  puhlic  good  requires.  (143  U.  S.,  517,  535, 
Build  case.)  That  is  the  sole  test— the  puhlic  good  is  the 
supreme  law. 

1  See  Munn  vs.  111.,  94  U.  S.,  113.  Where  numerous  statutes 
are  cited  by  the  chief  justice  to  sustain  this  proposition;  see  also 
Cooley  on  Const.  Liins.,  734-5. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     479 

rates,  as  well  as  service  in  one  or  more  lines  of 
business,  to  municipal  authorities.  In  other  cases, 
the  Legislature  reposes  in  the  city  government  a 
limited  power  of  regulating  accommodations  and 
service,  and  confers  the  power  of  fixing  rates  upon 
State  commissions,  like  the  railway  commission 
and  the  Gas  and  Electric  Light  Commission  of 
Massachusetts,  boards  which  act  upon  petition 
either  of  the  public  or  the  companies,  but  which 
are  very  unsatisfactory,  for  several  reasons.  First, 
they  represent  centralized  bureaucracy  instead  of 
local  self-government.  Second,  their  salaries  are 
paid  by  the  companies,  and  they  are  said  to  be 
nominated  by  them.  However  that  may  be,  they 
are  beyond  a  doubt,  consciously  or  unconsciously, 
very  largely  in  sympathy  with  and  under  the 
influence  of  the  companies  and  their  leading  offi- 
cers and  attorneys.  The  commissioners  are  thrown 
into  close  association  with  these  corporate  officers 
and  attorneys,  who  know,  as  a  rule,  a  great  deal 
more  about  the  business  than  the  commissioners, 
and  have  large  influence,  learning,  pleasant  man- 
ners, and  every  other  means  of  making  themselves 
attractive ;  and  it  is  not  strange  that  the  commis- 
sioners should  become  quite  largely  imbued  with 
the  ideas  of  their  agreeable  associates  and  pay- 
masters. 

3.    The  prices  and   rates    fixed   by  legislative 
authority   must  not  be   unreasonably  low.       The 


480  MUNICIPAL  MONOPOLIES. 

Federal  Constitution  will  not  allow  the  regulated 
party  to  be  deprived~"of  his  property  without  due 
process  of  law ;  i.e.,  without  a  hearing  and  judicial 
proceeding.  Except  to  satisfy  a  valid  claim,  his 
property  cannot  be  taken  without  a  just  compen- 
sation. 

4.  The  clause  of  the  Constitution  which  gives 
Congress  control  of  interstate  and  foreign  com- 
merce does  not  prevent  any  State  from  making 
regulations  in  respect  to  persons  and  property 
within  its  own  borders,  although  such  regulations 
affect  interstate  and  foreign  commerce,  if  Congress 
has  made  no  laws  touching  the  subject,  or  if,  al- 
though Congress  has  made  such  laws,  there  is 
nothing  in  them  with  which  the  State  law  con- 
flicts.1 

1  The  following  cases  will  illustrate  the  above  propositions:  — 
Escanaba  Co.  vs.  Chicago,  107  U.S.,  678;  Gilnian  vs.  Phila- 
delphia, 3  Wall.,  713 ;  Transportation  Co.  vs.  Parkersburg,  107  U.  S., 
at  701 ;  city  ordinance  regulating  wharfage  and  charges  on  a  ves- 
sel plying  between  Pittsburg  and  Cincinnati,  and  belonging  to  a 
Virginia  company.  See  further,  94  U.S.,  177;  Ibid.,  113  at  135: 
and  5  Howard,  504,  the  original  package  case  of  1847.  Compare 
125  U.  S.,  465,  March,  1888,  the  famous  recent  "  Original  Package 
Decision;  "  also  135  U.S.,  100;  Act  of  Congress,  Aug.  8,  1800,  26 
Statutes,  313  c.  728.  In  140  U.  S.,  545,  the  Kansas  prohibitory  laws 
were  held  valid.  In  118  U.  S.,  557  ;  154  U.  S.,  204;  143  U.  S.,  517  ; 
162  U.S.,  650;  120  U.S.,  493;  141  U.  S.,  47,  58;  116  U.S.,  446;  136 
U.S.,  313,  326-8,  and  other  cases,  it  will  be  found  on  careful  read- 
ing that  wherever  State  regulations  are  held  invalid  as  affecting 
interstate  commerce,  the  real  ground  of  decision  is  a  contract,  or 
an  element  of  discrimination  in  the  law.  It  was  this  that  formed 
the  basis  of  decision  against  the  first  South  Carolina  dispensary 
law.     (Scott  vs.  Donald,  165  U.  S.,  58,  99,  100.) 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     481 

A  State  may  regulate  the  sale  of  oleomarge- 
rine ;  *  may  authorize  a  city  to  regulate  the  burial 
of  the  dead;2  may  require  electrical  companies  to 
file  maps  with  a  board  of  commissioners  and  to 
pay  the  salaries  and  expenses  of  the  board;  3  may 
compel  a  railway  company  to  fence  its  lines,  make 
wider  -and  better  bridges,  build  a  station  at  a  spe- 
cified place,  and  stop  its  trains  there,4  etc.,  etc. 

A  State  may  authorize  municipalities  to  fix  the 
charges  of  a  private  water  company.5  In  the 
Spring  Valley  case,  Chief  Justice  Waite  said :  — 

"  Statutes  have  been  passed  in  many  States  requiring 
water  companies,  gas  companies,  and  other  companies  of 
like  character,  to  supply  their  customers  at  prices  to  be 
fixed  by  the  municipal  authorities ;  and,  as  an  independent 
proposition,  we  see  no  reason  why  such  a  regulation  is  not 
within  the  scope  of  legislative  power,  unless  prohibited  by 
constitutional  limitations  or  valid  contract  obligations. 

"  That  it  is  within  the  power  of  the  government  to  reg- 
ulate the  prices  at  which  water  shall  be  sold  by  one  who 
enjoys  a  virtual  monopoly  of  the  sale,  we  do  not  doubt."  6 

i  Plumley  vs.  Mass.,  155  U.  S.,  461. 

2  Brick  Pres.  Church  vs.  New  York,  5  Cowen,  538,  542. 

3  New  York  vs.  Squire,  145  U.  S.,  175. 

4  Minneapolis  &  St.  Louis  Ry.  vs.  Emmons,  149  U.S.,  364;  32 
Conn.,  240;  103  Mass.,  254. 

5  Spring  Valley  Water- Works  vs.  Schottler,  110  U.  S.,  347,  354. 
There  was  no  question  of  reasonableness  —  defendant  denied 

the  right  to  regulate  at  all. 

Field,  J.,  dissented,  holding  that  the  State  by  such  action 
impaired  the  obligation  of  contract. 

s  Citing  Munn  vs.  111.,  94  U.S.,  113,  as  having  settled  that 
question. 


482  MUNICIPAL  MONOPOLIES. 

The  Legislature  has  a  right  to  regulate  tele- 
graph and  telephone  companies,  fix  their  rates, 
prescribe  the  service  they  shall  render,  and  pro- 
hibit discriminating  contracts.1  Turnpikes  are  sub- 
ject to  the  police  power  in  the  fixing  of  grades, 
regulation  of  rates,  etc.2 

The  speed,  accommodations,  and  rates  of  street 
railways  may  be  regulated  under  the  police  power 
of  a  State  or  municipality.3  A  State  may  order 
a  street  railway  to  remove  snow  and  ice,  to  num- 
ber and  license  cars,  to  limit  the  speed  of  cars,  to 
operate  more  cars,  etc.4  A  statute  fixing  transfers 
at  8  cents  is  good,5  so  is  a  law  limiting  ferry  tolls 
collected  of  street  railway  passengers,6  also  an  Act 


1  Chesapeake,  &c,  Telegraph  Co.  vs.  B.  &  O.  Telegraph  Co., 
66  Md.,  399  (1880) ;  Hockett  vs.  State,  105  Ind.,  250.  The  Indiana 
Act  of  April  13,  1885,  fixing  the  rent  of  a  telephone  at  not  over ' 
three  dollars  a  month,  or  $2.50  if  more  than  one  phone  is  rented 
by  the  same  individual,  company,  or  corporation,  is  held  valid. 
The  company  had  been  charging  $11.16  a  month.  See  also  106 
Ind.  1;  118  Ind.,  194.  207;  66  Md.,  399,  414,  deciding  further  that 
telephone  and  telegraph  companies  cannot  refuse  to  perform  their 
accustomed  services  for  any  well-behaved  person.  They  cannot 
discriminate  any  more  than  a  railway  or  a  hotel;  they  are,  in- 
deed, common  carriers  of  news. 

2  Elliott  on  Roads  and  Streets,  58-60. 

3  Buffalo,  &c,  Ry.  vs.  Railway,  111  N.  Y.,  132  (1888) ;  117  Mass., 
544;  58  Pa.,  119;  95  111.,  313;  36  Neb.,  307;  22  N.  J.  L.  (2  Zab.), 
623;  19  Minn.,  418. 

4  Frankford,  &c,  Ry.  Co.  vs.  Philadelphia,  58  Pa.,  119.  Booth 
on  St.  Ry.  Law,  p.  336. 

■>  Wakefield  vs.  South  Boston  R.R.  Co.,  117  Mass.,  544,  chap. 
381,  §36,  Laws  of  1871. 

c  Parker  vs.  R.R.  Co.,  109  Mass.,  506. 


THE  LEGAL   ASPECTS    OF  MONOPOLY.     483 

reducing  fares  on  the  Buffalo  street  railways  to  5 
cents.1 

The  Legislature  has  a  right  to  fix  rates  on  street- 
car lines,  though  no  such  power  was  expressly  re- 
served, and  though  the  charter  says,  "  the  directors 
shall  fix  rates."  2  In  March,  1897,  the  Indiana 
Legislature  passed  an  Act  providing  that  "  in  cities 
of  this  State  having  a  population  of  100,000  or 
more,  according  to  the  United  States  census  of 
1890 ',"  the  street  railway  fares  should  not  exceed 
3  cents.  The  validity  of  the  Act  is  now  under 
litigation,  not  upon  any  denial  of  the  legislative 
right  to  make  reasonable  regulations  as  to  rates, 
but  on  the  ground  that  the  law  is  special  legisla- 
tion contrary  to  the  Indiana  Constitution,  and  is 
an  impairment  of  the  obligation  of  contract.3 


i  Buffalo  E.  S.  R.R.  Co.  vs.  B.  S.  Ed.  Co.,  Ill  N.  Y.,  132,  chap. 
600,  N.  Y.  Laws,  1875. 

2  Illinois  Cent.  Rd.  Co.  vs.  The  People,  95  111.,  313;  the  Legis- 
lature has  a  general  power  to  "  define,  prohibit,  and  punish  extor- 
tion," p.  315. 

3  The  Indianapolis  conflict  began  by  the  introduction  of  a  bill 
to  terminate  the  street-railway  charter  in  1901.  The  railway 
attorney  said,  "That  is  not  what  the  people  want.  The  people 
want  lower  fares."  Then  a  bill  was  introduced  for  3-cent  fares, 
and  it  passed.  The  railway  company  asked  for  a  Federal  injunc- 
tion, and  the  Circuit  Court  granted  it,  holding  the  Act  uncon- 
stitutional. (Central  Trust  Co.  of  New  York  vs.  Citizens'  Street 
Railway  Co.,  80  Fed.  Rep.,  218,  April  23, 1897.)  In  another  case  the 
matter  came  into  the  Supreme  Court  of  tbe  State,  and  that  court 
held  the  Act  constitutional.  (City  of  Indianapolis  vs.  Navin,  47 
N.E.  Rep.,  525,  June  11, 1897.)  In  tbe  light  of  tins  decision  Judge 
Showalter  of  the  Circuit  Court  was  asked  to  dissolve  the  Federal 


484  MUNICIPAL  MONOPOLIES. 

Upon  the  principle  that  control  of  street  rail- 
ways comes  under  the  police  power  of  a  city,  Lin- 


injunction  ;  but  he  refused,  saying  that  a  Federal  court  is  not 
hound  hy  a  State  decision  where  a  question  of  the  impairment  of 
contract  is  involved,  (Central  T.  Co.  vs.  Citizens'  Ry.  Co.,  82  Fed. 
Rep.,  1,  July  22, 1897.)  Afterward  the  matter  came  before  Judge 
Woods  in  the  Circuit  Court  of  Appeals  (City  of  Indianapolis  vs. 
Central  Trust  Co.,  83  Fed.  Rep.,  529,  Dec.  10,  1897),  and  it  has 
now  gone  to  the  United  States  Supreme  Court  for  final  decis- 
ion. 

The  grounds  stated  in  the  Federal  Reports  for  holding  the  law 
unconstitutional  are :  (1)  that  it  is  a  special  Act,  since  it  applies 
only  to  the  city  of  Indianapolis,  and  never  can  apply  to  any  other 
city;  and  (2)  that  it  impairs  the  obligation  of  contract  in  two 
ways ;  first,  it  violates  the  implied  contract  between  the  State 
and  the  company,  that  any  repeal  or  modification  of  its  powers 
should  be  by  a  law  in  accord  with  the  Constitution  of  the  State, 
which  this  is  not,  because  it  is  special  legislation;  and  second,  it 
breaks  in  upon  a  contract  between  the  city  of  Indianapolis  and 
the  street  railways,  by  which  it  was  agreed  that  the  latter  might 
charge  a  5-cent  fare. 

The  Indiana  Supreme  Court  holds  that  there  is  no  impairment 
of  any  valid  contract  between  the  city  and  the  roads,  since  the 
city  had  no  authority  to  make  any  agreement  that  could  prevent 
the  Legislature  from  exercising  its  rights  to  regulate  tolls.  The 
other  objection  to  the  law,  the  main  one  in  the  Federal  decisions, 
the  Indiana  court  does  not  fairly  meet.  It  says,  "A  law  which 
applies  to  cities  having  a  population  of  100,000  or  more,  when 
there  is  but  one  such  city,  but  is  so  framed  as  to  operate  in  all 
other  cities  in  the  State  as  they  acquire  the  necessary  population, 
is  a  general  law."  That  is  true;  but  ixnfortunately  this  Indiana 
Act  is  not  framed  in  that  way.  It  applies  only  to  "  cities  in  this 
State  having  a  population  of  100,000  or  more,  according  to  the 
United  States  census  of  1890."  (Indiana  Laws,  1897,  p.  201.)  In- 
dianapolis is  the  only  city  that  comes  within  that  clause,  or  ever 
can  come  within  it.  The  Act  is  as  clearly  special  legislation  as  if 
the  word  Indianapolis  were  substituted  in  it  for  the  clause  just 
quoted.  Reformers  ought  to  be  careful  to  draw  their  bills  cor- 
rectly.   The  question  here  raised  is  not  a  new  one,  and  the  law  is 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     485 

coin,  Nebraska,  fixed  streetcar  rates  at  4  rides  for 
25  cents,  and  the  ordinance  was  held  good.1 


clear.  .(WTieeler  vs.  Philadelphia,  77  Pa.  St.,  338,  349.  An  Act 
limited  to  cities  of  300,000  or  more  population  is  not  special,  al- 
though there  is  at  present  only  one  city  of  that  population  in  the 
State.  The  law  will  apply  to  other  cities  as  they  reach  the  stated 
limit;  see  also  Ewing  vs.  Hohlitzelle,  85  Mo.,  64.  But  an  Ohio 
Act  applying  to  "  cities  of  the  2d  class,  over  31,000  population  at 
the  last  Federal  census,"  was  held  special.  It  applied  only  to  Co- 
lumbus, and  the  court  said  it  could  not  apply  to  any  other  city. 
State  vs.  Pugh,  43  Ohio  St.,  at  116;  and  even  this  Act  was  Iqss 
definite  than  the  Indiana  Act.  After  the  12th  census  it  might  he 
held  that  that  was  the  "last  Federal  census"  within  the  meaning 
of  the  Act,  but  no  such  plea  could  be  made  in  respect  to  an  Act 
limited  to  "the  census  of  1890."  That  is  absolutely  definite. 
There  never  can  be  another  census  of  1890.) 

The  Federal  court  is  also  clearly  right  in  holding  that  it  is  not 
bound  by  State  decisions  or  interpretations  of  State  constitutions 
when  a  question  of  impairing  the  obligation  of  contract  is  involved. 
If  State  decisions  as  to  the  existence  of  contract  were  binding  on 
Federal  courts,  the  guaranties  of  the  National  Constitution  against 
impairment  of  contract  could  be  avoided  in  any  State  by  a  local 
finding  that  there  was  no  contract.  Whether  the  Federal  judge 
is  also  right  in  holding  that  there  is  a  contract  in  this  case  is 
doubtful.  The  decision  of  the  Federal  Supreme  Court  is  awaited 
with  interest.  It  is  perfectly  clear  now  that  such  laws  should  be 
drawn  in  general  terms  that  may  admit  other  cities  in  the  future. 
The  words  italicized  in  the  text  should  have  been  omitted  from 
the  Act. 

i  Maxwell,  C.  J.,  in  Sternberg  vs.  State,  36  Neb.,  307,  317  (1893). 
A  city  has  a  right,  under  the  general  police  power,  to  fix  reason- 
able rates  of  transit. 

Note  by  the  Editor.  —  In  May,  1898,  Judge  Seaman,  of  the 
United  States  Circuit  Court,  decided  against  an  ordinance  of  the 
city  of  Milwaukee  reducing  street-car  fares  in  that  city  to  6  tick- 
ets for  25  cents,  and  25  tickets  for  $1.  (Milwaukee  Electric  Rail- 
way and  Light  Co.  vs.  City  of  Milwaukee,  Federal  Reporter,  vol. 
87,  p.  577.)    To  quote  the  decison:  — 

"  Assuming,  therefore,  without  so  deciding,  that  the  general 


486  MUNICIPAL  MONOPOLIES. 

The  right  of  a  State  to  regulate  the  charges  of 
railroads    is    well  established.1     In  the  Wellman 

power  to  fix  and  regulate  the  terms  and  rates  to  be  charged  sub- 
sists in  the  municipality,  — namely,  that  by  delegation  it  became 
vested  with  and  still  retains  the  full  extent  of  legislative  power 
undoubtedly  possessed  by  the  State,  —  there  can  be  no  inquiry 
here  as  to  the  wisdom  or  good  policy  of  exercising  the  power  so 
delegated  ;  that  being  a  matter  of  municipal  discretion,  over  which 
the  courts  have  no  right  of  supervision  or  review." 

The  company  had  $14,250,000  of  stock  and  bonds,  and  claimed 
that  the  price  paid  for  the  plant  in  1891,  when  a  horse-car  line, 
together  with  the  cost  of  improvements  since,  such  as  the  trans- 
formation to  electricity,  had  actually  cost,  for  the  143  miles  of 
track,  $8,885,644.17,  or  about  $62,000  a  mile,  but  admitted  that 
the  whole  plant  could  be  duplicated  for  $5,153,287.76,  or  $36,037 
per  mile. 

Judge  Seaman  thought  the  company  entitled  to  earn  dividends 
on  $2,000,000  also,  of  the  preliminary  expenditures  of  the  purchase 
of  the  plant,  thus  raising  the  proper  capitalization  to  about  $50,000 
per  mile,  and  accepted  the  estimate  of  the  company  that  the  re- 
ductions of  fare  would  not  increase  traffic  more  than  expenses,  and 
that  the  company  during  1894,  1895,  and  1896  had  not  earned  over 
3.2  per  cent  on  $7,000,000,  after  providing  a  proper  depreciation 
fund,  and  therefore  the  company  could  not  afford  to  reduce  fares. 

i  Dow  vs.  Beidelman,  125  U.  S.,  680  (1887) ;  Chicago,  &c,  By. 
Co.  vs.  Wellman,  143  U.  S.,  339;  see  also  the  Munn  and  Budd 
and  Nebraska  cases  infra.  , 

In  the  "  Granger  Decisions  "  of  the  seventies,  the  United  States 
Supreme  Court  said  that  when  rates  were  fixed  by  the  Legislature, 
not  indirectly  through  a  commission,  but  by  direct  specification 
in  the  law  itself,  the  courts  could  not  question  their  reasonable- 
ness. "  For  protection  against  abuses  by  legislatures,  the  people 
must  resort  to  the  polls,  not  to  the  courts."  (See  Peik  vs.  Chicago, 
94 U.S.,  at  178;  Munn  vs.  Illinois,  94 U.  S.,  at  134;  Chicago,  B.  &0. 
Bd.  vs.  Iowa,  94  U.  S.,  155 ;  Ibid.,  164, 179.)  As  a  matter  of  fact,  the 
rates  established  by  the  Granger  laws  appeared  to  be  reasonable, 
so  that  the  doctrine  of  legislative  supremacy  was  a  dictum,  and 
a  very  shaky  one.  To  say  that  courts  would  not  interfere  with 
legislative  rates  was  simply  to  affirm  that  there  was  one  way  in 
which  a  Legislature  could  take  private  property  without  just  corn- 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     487 

case  the  Federal  Supreme  Court  said,  "  The  Legis- 
lature has  power  to  fix  rates,  and  the  extent  of 
judicial  interference  is  protection  against  unreason- 
ble  rates." 

If  the  rates  fixed  for  a  State  allow  any  substan- 
tial margin  beyond  proper  expenses,  it  is  probable 
that  the  courts  will  not  interfere ;  the  question 
what  is  a  reasonable  percentage  of  profit  in  the 
given  business  may  perhaps  be  left  to  the  Legisla- 
ture. If  the  rates  allow  a  return  equal  to  that  ob- 
tained by  similar  labor  and  capital  in  other  business, 
they  are  clearly  reasonable.  If  the  rates  will  not 
cover  operating  expenses,  they  are  clearly  unreason- 
able, and  will  be  enjoined.     In  respect  to  this,  it  is 


pensation,  and  -without  a  hearing  —  one  way  in  which  the  courts 
would  allow  a  Legislature  to  violate  the  Federal  Constitution. 
Such  a  doctrine  could  not  last ;  and  the  Supreme  Court  now  holds 
that  the  power  of  regulation  is  not  a  power  to  confiscate  or  de- 
stroy, or  to  compel  the  doing  of  service  without  reward,  or  to  take 
property  without  just  compensation  or  due  process  of  law,  or  to 
deny  the  equal  protection  of  the  laws  as  guaranteed  by  the  Con- 
stitution. It  is  part  of  the  business  of  courts  to  prevent  legisla- 
tive abuses  of  this  sort.  (See  cases  cited  at  the  beginning  of  this 
note,  and  also  Chicago,  M.  &  St.  P.  Ry.  Co.  vs.  Minnesota,  134 
U.  S.,  418.)  In  143  U.  S.,  546,  the  court  said  that  if  the  Legislature 
left  any  compensation  above  proper  and  lawful  expenses,  the  rates 
would  be  sustained,  the  reasonableness  of  the  margin  being  a  le- 
gislative and  not  a  judicial  question.  This  is  probably  not  quite 
true.  To  put  a  strong  case,  suppose  the  statute  rates  were  fairly 
tried  to  ascertain  the  effect  of  increased  traffic,  etc.,  and  there  was 
a  margin  of  only  one  hundredth  of  one  per  cent  on  actual  invest- 
ment year  after  year  under  honest  bookkeeping  supervised  by  the 
State,  it  seems  hardly  possible  that  the  courts  would  sustain  the 
rates. 


488  MUNICIPAL   MONOPOLIES. 

a  question  how  far  a  decision  should  proceed  until 
the  rates  have  been  put  into  operation  a  sufficient 
length  of  time  to  determine  their  effect  in  increas- 
ing traffic.1 

THE  GRAIN  ELEVATOR  CASES. 

In  the  great  case  of  Munn  vs.  Illinois,2  the  Legis- 
lature fixed  the  maximum  charges  which  the  Chi- 
cago grain  warehouses  should  make,  at  2  cents  a 
bushel  for  the  first  30  days,  and  \  a  cent  a  bushel 
for  each  15  days  afterward ;  and  the  United  States 
Supreme  Court  sustained  the  decision  of  the  Illinois 
Supreme  Court  in  favor  of  the  law,  although  the 
warehouses  had  been  built  by  private  capital  on  pri- 
vate land,  and  were  owned  by  private  persons,  and 
controlled  by  them  in  their  own  private  business. 

The  same  principle  was  sustained  in  the  still 
greater  case  of  Budd  vs.  New  York.3  The  Legis- 
lature of  New  York  had  fixed  the  maximum  price 
of  elevating,  receiving,  weighing,  and  discharging 
grain  by  elevators  in  the  cities  at  §  of  a  cent  per 

1  In  the  Wellmau  case  the  Legislature  of  Michigan  had  fixed 
the  maximum  passenger  rates  at  2  cents  a  mile ;  and  the  law  was 
held  good,  although  the  company  introduced  a  statement  to  show 
that  its  earnings  the  previous  year  had  just  paid  expenses  and  in- 
terest on  its  deht,  leaving  nothing  for  profit.  It  appeared,  how- 
ever, from  the  company's  report,  that  its  average  rate  the  year 
hefore  was  a  trifle  under  2  cents  a  mile ;  and  the  court  further  said 
that  even  without  this  fact  it  could  not  hold  the  law  unreasonahle, 
since  a  lowering  of  rates  might  increase  business  and  earnings. 
2  94  U.  S.,  113.  3  143  u.  S.,  517,  Feb.  29,  1892. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     489 

bushel.  The  owners  of  the  elevators  claimed  that 
such  a  law  was  unconstitutional,  as  taking  private 
property  for  public  use  without  compensation,  and 
forbidding  citizens  to  make  a  profit  by  the  use  of 
their  property.  Again  the  United  States  Supreme 
Court,  in  a  magnificent  opinion,  sustained  the  de- 
cision of  the  New  York  Court  of  Appeals  (117 
N.  Y.,  1)  in  favor  of  the  law,  holding  that  the  State 
had  a  right  to  regulate  any  business  "  affected  with 
a  public  interest;"  that  is,  any  business,  the  regula- 
tion of  which  is  necessary  to  subserve  the  public 
good. 

The  language  of  the  court  in  both  cases  was, 
"  The  government  regulates  the  conduct  of  its  citi- 
zens one  towards  another,  and  the  manner  in  which 
each  shall  use  his  own  property,  when  such  regu- 
lation becomes  necessary  for  the  public  good."  l 

In  both  cases  the  court  said  that  there  was  a 
practical  monopoly*  and  that  "  when  a  business 
becomes  a  practical  monopoly  it  is  subject  to  regu- 
lation by  the  legislative  power."  3 

There  is  a  dissenting  opinion  in  the  Budd  case, 
which  is  important  because  of  the  clearness  with 
which  it  shows  that  if  the  principles  of  the  majority 
opinion  are  accepted  (and  they  are  the  established 
principles),  then  it  follows  that  the  Legislature  may 
regulate  charges  in  any  business  whatever.4 

1  143  U.S.,  535.  2  ijjia.,  543.  3  Ibid.,  537. 

4  The  dissenting  opinion  says,  "  There  is  scarcely  any  property 


490  MUNICIPAL   MONOPOLIES. 


KANSAS   STOCK-YARDS   CASE. 

The  Kansas  statute  of  March  3,  1897,  regulating 
stock-yards,  fixing  compensation  for  yarding,  feed- 
ing, and  watering  live  stock,  and  fixing  a  limit  for 
the  prices  of  feed,  etc.,  which  allowed  a  net  income 
of  5.67  per  cent  annually  on  the  actual  value  of 
the  property  used  for  stock-yard  purposes    (or  of 

in  whose  use  the  public  has  no  interest.  .  .  .  Surely  the  matters 
in  which  the  public  has  the  most  interest  are  the  supplies  of  food 
and  clothing;  yet  can  it  be  that  by  reason  of  this  interest  the  State 
may  fix  the  price  at  which  the  butcher  may  sell  his  meat  and  the 
shoemaker  his  shoes  ?  .  .  .  If  it  may  regulate  the  price  of  one  ser- 
vice, why  may  it  not  with  equal  reason  regulate  the  price  of  all?  " 
The  judge  appears  to  think  that  this  reduces  the  majority  opinion 
to  the  absurd,  but  he  gives  no  reason  for  denying  the  power  of  the 
State  to  regulate  meat-shops  or  clothing-houses  as  well  as  eleva- 
tors; and  is  not  easy  to  see  on  what  ground  it  can  be  denied  that 
the  State  has  a  right  to  regulate  any  other  business  on  the  same 
condition  that  it  may  regulate  grain  elevators;  viz.,  if  the  public 
good  requires  it. 

The  dissenting  justice  also  says,  "The  utmost  possible  liberty 
to  the  individual,  and  the  fullest  possible  protection  to  him  and 
his  property,  is  both  the  limitation  and  the  duty  of  government." 
Exactly;  but  which  individual  is  to  be  protected?  —  the  owner  of 
the  elevator,  or  the  man  who  has  to  pay  an  exorbitant  fee  for  his 
services?  —  the  owner  of  the  coal-mine,  or  the  coal  consumer?  — 
the  railroad  king,  or  the  passenger?  If  the  State  stands.by  while 
the  elevator  and  the  railroad  and  the  coal  combine  deal  unjustly 
by  the  merchant,  the  farmer,  the  laborer,  and  the  mechanic,  is 
that  giving  "the  fullest  possible  protection  to  the  citizen  and  his 
property,"  which  the  dissenting  justice  says  is  the  "  duty  of  gov- 
ernment "  ?  And  if  the  State  does  not  stand  idly  by,  if  it  does 
this  duty,  it  must  either  regulate  or  buy,  and  until  it  gets  ready  to 
buy,  it  must  regulate.  —  Therefore,  the  principles  of  the  dissenting 
judge  directly  lead  to  the  majority  opinion  from  which  he  ima- 
gined that  he  dissented. 


THE  LEGAL   ASPECTS    OF  MONOPOLY.     491 

4.24  per  cent  on  its  value  as  expressed  in  its  shares 
of  capital  stock  at  their  par  value),  does  not  operate 
to  deprive  the  company  (Kansas  City  Stock- Yards 
Company)  of  its  property  without  due  process  of 
law,  and  is  not  in  violation  of  the  Federal  Consti- 
tution, though  it  reduces  the  previous  net  income 
nearly  50  per  cent.1 

"  When  a  valuation  is  placed  on  property  which  has  be- 
come affected  with  a  public  use,  for  the  purpose  of  ascer- 
taining whether  the  maximum  rate  of  compensation  fixed 
by  law  for  its  use  is  reasonable  or  otherwise,  it  is  obvious 
that  the  income  derived  therefrom  by  the  owner  before < it 
was  subjected  to  legislative  control  cannot  always  be  ac- 
cepted as  a  proper  test  of  value,  because  the  compensation 
which  the  owner  charged  for  its  use  may  have  been  exces- 
sive and  unreasonable.  Again,  when  property  has  been 
capitalized  by  issuing  stock,  neither  the  market  value  nor 
the  par  value  of  the  stock  can  be  accepted  in  all  cases  as  a 
proper  criterion  of  value,  because  the  stock  may  not  repre- 
sent the  money  actually  invested,  and,  furthermore,  because 
the  property  may  have  been  capitalized  mainly  with  refer- 
ence to  its  income-producing  capacity,  on  the  assumption 
that  it  is  ordinary  private  property,  which  the  owner  may 
use  as.  he  thinks  proper,  without  being  subject  to  legislative 
control."  2 

THE   NEBRASKA   DECISION. 

We  will  close  this  discussion  with  a  considera- 
tion of  the  recent  decision  of  the  United  States 

i  Cotting  vs.  Kansas  City  Stock- Yards  Co.,  82  Fed.  Rep.,  839, 
Oct.  4,  1897 ;  Ibid.,  850,  Oct.  28,  1897.  2  zbid.,  at  p.  854. 


49:2  MUNICIPAL   MONOPOLIES. 

Supreme  Court  in  Smyth  vs.  Ames,  commonly 
known  as  the  Nebraska  Decision.1  The  Nebraska 
Legislature  passed  an  Act  fixing  maximum  rates 
for  the  transportation  of  freight  by  railroad  between 
any  two  points  in  the  State,  embodying  full  tables 
of  classification  and  rates  in  the  statute,  and  au- 
thorizing and  directing  the  board  of  transportation 
to  reduce  rates  still  further  on  any  class  of  com- 
modity whenever  it  should  seem  just  and  reason- 
able to  a  majority  of  the  board  to  do  so.  The 
railroads  claimed  that  the  statute  rates  would  bring 
their  income  on  local  traffic  below  their  local  oper- 
ating expenses.  The  Circuit  Court,2  on  proof  to 
this  effect,  issued  an  injunction  against  the  enforce- 
ment of  the  statute,  adding  that  "the  board  of 
transportation  of  said  State  may  hereafter,  where 
the  circumstances  have  changed  so  that  the  rates 
fixed  in  said  Act  shall  yield  to  the  said  companies 
reasonable  compensation  for  the  services  aforesaid, 
apply  to  this  court  by  supplemental  bill  or  other- 
wise, as  they  may  be  advised,  for  a  further  order 
in  that  behalf." 

Upon  appeal  to  the  Supreme  Court  the  Circuit 
judgment  was  sustained.  The  evidence  satisfied 
the  Supreme  Court  that  "the  average  reduction 
made   by  the  statute  on  all  the  'commodities  of 

i  Smyth  vs.  Ames,  169  U.S.,  466,  March  7,  1898;  18  Sup.  Ct. 
Rep.,  418 ;  171  U.  S.,  361,  May  31,  1898 ;  Laws  of  Neh.,  1893,  p.  164, 
chap.  24. 

-  64  Fed.  Rep.,  165,  Justice  Brewer  presiding. 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     493 

local  rates '  was  29.50  per  cent ;  "  that  "  the  per- 
centage of  operating  expenses  on  local  business 
would  exceed  the  percentage  of  operating  expenses 
on  all  business  by  at  least  10  per  cent,  and  it 
might  go  as  high  as  20  per  cent  or  higher ;  "  and 
that,  upon  5  out  of  the  7  roads  involved,1  the  per- 
centage of  operating  expenses  to  earnings  on  all 
business  ranged  from  62  per  cent  to  99  per  cent 
for  the  three  years  preceding  the  Act  (in  one  case 
the  Omaha  Co.,  1891,  going  as  high  as  120  per 
cent).  Adding  10  per  cent  to  get  the  ratio  of 
local  operating  expenses  to  local  earnings,  the 
court  found  percentages  varying  from  72  to  130; 
whereupon  it  was  clear  that  the  statute  reduction 
of  earnings  on  local  business  by  29.50  per  cent, 

1  Under  the  statute  rates  the  Fremont  road  would  have  gained 
10.63  per  cent  ahove  operating  expenses  in  1891,  lost  10.21  percent 
in  1892,  and  gained  6.84  per  cent  in  1893—  assuming  that  the  traf- 
fic would  have  heen  no  larger  under  statute  rates.  The  Union 
Pacific  would  have  lost  8.44  per  cent  in  1891,  gained  4.06  per  cent 
1892,  and  2  per  cent  in  1893.  The  other  companies— Burlington 
Company,  St.  Paul  Company,  Omaha  Company,  St.  Joe  Company, 
and  Kansas  City  Company — would  have  lost  in  all  three  years 
on  the  said  assumption. 

It  was  contended  that  even  if  the  companies  did  lose  on  local 
business,  their  profits  on  through  business  would  more  than  make 
up  the  loss.  The  court  admitted  this,  but  held  that  local  rates 
could  not  be  reduced  below  the  cost  of  local  business,  no  matter 
what  profits  might  arise  from  other  sources. 

Congress  had  reserved  power  to  fix  rates  on  the  Union  Pacific; 
but  the  Supreme  Court  held  that  "until  Congress  prescribes  the 
rates,  it  remains  with  the  States  through  which  the  road  passes 
to  fix  rates  for  transportation  beginning  and  ending  within  their 
respective  limits." 


494  MUNICIPAL  MONOPOLIES. 

leaving  only  70.50  per  cent,  would  bring  the  local 
earnings  below  the  local  operating  expenses ;  and 
of  course  a  statute  requiring  any  road  to  do  busi- 
ness below  cost  must  be  declared  void,  under  the 
Fourteenth  Amendment  to  the  Federal  Constitu- 
tion, providing  that  no  State  shall  deprive  any  per- 
son of  property  without  due  process  of  law,  nor 
deny  to  any  person  within  its  jurisdiction  the  equal 
protection  of  the  laws.1 . 

It  must  be  noted  that  the  increase  of  local  rail- 
way traffic  likely  to  result  from  lower  rates  does  not 
seem  to  have  been  taken  into  account.  In  the  ma- 
jority of  cases  it  would  be  very  difficult  to  say  that 
the  increase  of  traffic  that  might  come  with  lower 
rates  would  not  be  sufficient  to  make  the  new  rates 
yield  a  profit.  This  principle  was  recognized  in  the 
Wellman  case. 

1  The  court  said  it  was  settled  that  a  corporation  is  a  "  person  " 
within  the  Amendment  (118  U.  S.,  394,  390;  142  U.  S.,  386,  391; 
1(55  U.  S.,  150, 154) ;  and  proceeded  to  quote  Chief  Justice  Waite  to 
the  effect  that  -while  a  State  may  fix  internal  railway  charges  un- 
less restrained  hy  valid  contract  or  its  action  amounts  to  a  regula- 
tion of  interstate  or  foreign  commerce,  yet  it  must  he  rememhered 
that  "under  pretense  of  regulating  fares  and  freights,  the  State 
cannot  require  a  railroad  corporation  to  carry  persons  or  property 
without  reward."  Again,  "  If  the  company  is  deprived  of  the 
power  of  charging  reasonable  rates  for  the  use  of  its  property,  and 
such  deprivation  takes  place  in  the  absence  of  an  investigation  by 
judicial  machinery,  it  is  deprived  of  the  lawful  use  of  its  property, 
and  thus,  in  substance  and  effect,  of  the  property  itself,  without 
due  process  of  law,  and  in  violation  of  the  Constitution  of  the 
United  States;  and,  in  so  far  as  it  is  thus  deprived,  while  other 
persons  are  permitted  to  receive  reasonable  profits  upon  their 
invested  capital,  the  company  is  deprived  of  the  equal  protection 
of  the  laws." 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     495 

It  is  fair  in  such  legislation  to  make  the  reduced 
rates  apply  only  to  companies  realizing  a  specified 
profit,  say  5  per  cent  on  the  real  investment  above 
operating  cost  and  depreciation.  And  it  might  be 
a  good  thing  for  the  State  of  Nebraska  to  offer  to 
guarantee  the  roads  against  loss  during  a  year  or 
two  of  experiment  with  the  statute  rates,  and  use 
its  police  power  to  compel  the  companies  to  keep 
their  accounts  under  State  supervision,  so  that  the 
Legislature  and  the  people  and  the  courts  could 
become  acquainted  with  the  facts  to  a  certainty, 
and  the  possible  entry  of  construction  cost,  and 
lobby  expenses,  etc.,  under  operating  expenses, 
might  be  guarded  against.  It  may  be  that  very 
effective  work  might  be  done  in  this  way.  The 
public  supervision  of  railway  bookkeeping,  if  per- 
sistent and  thorough,  would  accomplish  much, 
even  without  a  guaranteed  experiment  of  lower 
rates.  Another  thing  Nebraska  can  do  is  to  enact 
a  new  law,  reducing  rates  10  per  cent  instead  of 
29^  per  cent,  and  providing  that  the  reduction 
shall  take  effect  only  on  roads  where  the  local 
earnings  have  exceeded  the  local  operating  ex- 
penses by  15  per  cent  during  the  two  or  three 
preceding  years.  Or  a  margin  of  perhaps  5  per 
cent  profit  above  operating  expenses  and  depreci- 
ation might  be  provided  for.  That  is,  the  accounts 
being  under  thorough  State  supervision,  the  statute 
rates  might  be  made  to  apply  only  where  the  rec- 


496  MUNICIPAL  MONOPOLIES. 

ords  of  the  past  few  years  indicate  that  they  will 
yield  5  per  cent  profit  on  the  actual  value  of  that 
proportion  of  the  plant  which  is  referable  to  local 
business,  making  allowance  in  the  calculation  for 
the  probable  effect  of  lowered  rates  upon  the  in- 
crease of  traffic.  Or  a  sliding-scale  of  rates  might 
be  adopted;  roads  making  5  per  cent  to  reduce 
charges  by  a  small  specified  percentage,  those  mak- 
ing 8  per  cent  to  lower  charges  by  a  somewhat 
larger  percentage,  those  making  10  per  cent  to 
lower  charges  still  more,  and  so  on. 

There  was  evidence  before  the  court  that  the 
local  rates  in  Nebraska  are  40  per  cent  higher 
than  in  Iowa,  and  that  the  rates  enacted  in  the 
Nebraska  statute  would  still  leave  Nebraska  local 
rates  much  higher  than  those  of  Iowa.  There  are, 
however,  230  people  per  mile  of  road  in  Iowa, 
and  only  190  people  per  mile  in  Nebraska ;  and 
the  mileage  earnings  in  Iowa,  in  spite  of  the  low 
rates,  are  greater  than  in  Nebraska.  In  view  of 
this,  and  in  face  of  the  direct  evidence  as  to  Ne- 
braska's earnings  and  expenses,  the  court  could  not 
lay  much  weight  on  such  analogies  between  State 
and  State.  The  thing  to  do  is  to  probe  the  matter 
to  the  bottom  in  every  State  by  opening  railway 
bookkeeping  to  public  inspection.  Railways  are 
quasi-public  institutions ;  the  public  is  a  partner, 
supplying  the  franchises,  often  the  most  valuable 
portion  of  the  properties  involved,  and  it  ought  to 


THE  LEGAL   ASPECTS   OF  MONOPOLY.     497 

have  the  privilege  of  inspecting  all  accounts,  and 
understanding  in  full  all  the  partnership  affairs. 

The  Nebraska  case  has  been  criticised  in  some 
quarters  as  a  corporation  decision,  but  I  do  not 
think  any  one  can  read  the  opinion  carefully  with- 
out feeling  that  the  Federal  courts  acted  in  perfect 
goo^.  faith  and  with  strong  reason.  A  sweeping 
law  that,  according  to  the  evidence  before  the 
court,  would  compel  some  roads  to  do  business 
below  the  cost  of  operation  could  not  reasonably 
be  sustained.  The  law  was  not  properly  drawn, 
or  else  the  evidence  was  imperfect.  A  reduction 
of  rates  not  unreasonable  on  the  facts  proved  in 
court  will  be  sustained.  The  Supreme  Court  em- 
phatically declared  that  although  a  State  could  not 
compel  a  railway  to  carry  freight  below  cost,  yet  on 
the  other  hand  a  railroad  could  not  demand  the 
privilege  of  collecting  rates  beyond  those  needed  to 
pay  operating  expenses  and  a  reasonable  return  on 
the  fair  value  of  the  property  involved;  it  could 
not  impose  on  the  public  the  burden  of  a  profit  on 
fictitious  capitalization.  Upon  this  important  point 
the  language  of  the  court  is  as  follows :  — 

"  In  the  discussion  the  plaintiffs  contended  that  a  rail- 
road company  is  entitled  to  exact  such  charges  for  trans- 
portation as  will  enable  it  at  all  times  not  only  to  pay 
operating  expenses,  but  also  to  meet  the  interest  regularly 
accruing  upon  all  its  outstanding  obligations,  and  justify 
a  dividend  upon  all  its  stock  ;  and  that  to  prohibit  it  from 


498  MUNICIPAL   MONOPOLIES. 

maintaining  rates  or  charges  for  transportation  adequate  to 
all  those  ends  will  deprive  it  of  its  property  without  due 
process  of  law,  and  deny  to  it  the  equal  protection  of  the 
laws.  This  contention  was  the  subject  of  elaborate  dis- 
cussion ;  and  as  it  bears  upon  each  case  in  its  important 
aspects,  it  should  not  be  passed  without  examination. 

"  In  our  opinion,  the  broad  proposition  advanced  by 
counsel  involves  some  misconception  of  the  relations  be- 
tween the  public  and  a  railroad  corporation.  It  is  unsound 
in  that  it  practically  excludes  from  consideration  the  fair 
value  of  the  property  used,  omits  altogether  any  considera- 
tion of  the  right  of  the  public  to  be  exempt  from  unreason- 
able exactions,  and  makes  the  interest  of  the  corporation 
maintaining  a  public  highway  the  sole  test  in  determining 
whether  the  rates  established  by  or  for  it  are  such  as  may 
be  rightly  prescribed  as  between  it  and  the  public.  A  rail- 
road is  a  public  highway,  and  none  the  less  so  because 
constructed  and  maintained  through  the  agency  of  a  cor- 
poration deriving  its  existence  and  powers  from  the  State. 
Such  a  corporation  was  created  for  public  purposes.  It 
performs  a  function  of  the  State.  Its  authority  to  exercise 
the  right  of  eminent  domain  and  to  charge  tolls  was  given 
primarily  for  the  benefit  of  the  public.  It  is  under  govern- 
mental control,  though  such  control  must  be  exercised  with 
due  regard  to  the  guaranties  for  the  protection  of  its  prop- 
erty. It  cannot,  therefore,  be  admitted  that  a  railroad 
corporation  maintaining  a  highway  under  the  authority  of 
the  State  may  fix  its  rates  with  a  view  solely  to  its  own 
interests,  and  ignore  the  rights  of  the  public.  But  the 
rights  of  the  public  would  be  ignored  if  rates  for  the  trans- 
portation of  persons  or  property  on  a  railroad  are  exacted 
without  reference  to  the  fair  value  of  the  property  used  for 
the  public,  or  the  fair  value  of  the  services  rendered ;  but 
in  order  simply  that  the  corporation  may  meet  operating 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     499 

expenses,  pay  the  interest  on  its  obligations,  and  declare  a 
dividend  to  stockholders. 

"If  a  railroad  corporation  has  bonded  its  property  for  an 
amount  that  exceeds  its  fair  value,  or  if  its  capitalization  is 
largely  fictitious,  it  may  not  impose  upon  the  public  the  burden 
of  such  increased  rates  as  may  be  required  for  the  purpose  of 
realizing  profits  upon  such  excessive  valuation  or  fictitious  cap- 
italization ;  and  the  apparent  value  of  the  property  and 
franchises  used  by  the  corporation  as  represented  by  its 
stocks,  bonds,  and  obligations,  is  not  alone  to  be  consid- 
ered when  determining  the  rates  that  may  be  reasonably 
charged.  What  was  said  in  Turnpike  Co.  vs.  Sandford,  164 
U.  S.,  578,  596-597,  is  pertinent  to  the  question  under  con- 
sideration. It  was  there  observed,  '  It  cannot  be  said  that 
a  corporation  is  entitled,  as  of  right,  and  without  reference 
to  the  interests  of  the  public,  to  realize  a  given  per  cent 
upon  its  capital  stock.  When  the  question  arises  whether 
the  Legislature  has  exceeded  its  constitutional  power  in 
prescribing  rates  to  be  charged  by  a  corporation  controll- 
ing a  public  highway,  stockholders  are  not  the  only  persons 
whose  rights  or  interests  are  to  be  considered.  The  rights 
of  the  public  are  not  to  be  ignored.  It  is  alleged  here 
that  the  rates  prescribed  are  unreasonable  and  unjust  to 
the  company  and  its  stockholders.  But  that  involves  an 
inquiry  as  to  what  is  reasonable  and  just  for  the  public. 
.  .  .  The  public  cannot  properly  be  subjected  to  unreason- 
able rates  in  order  simply  that  stockholders  may  earn  divi- 
dends. The  Legislature  has  the  authority  in  every  case, 
where  its  power  has  not  been  restrained  by  contract,  to 
proceed  upon  the  ground  that  the  public  may  not  right- 
fully be  required  to  submit  to  unreasonable  exactions  for 
the  use  of  a  public  highway  established  and  maintained 
under  legislative  authority.  If  a  corporation  cannot  main- 
tain such  a  highway  and  earn  dividends  for  stockholders,  it 


500  MUNICIPAL  MONOPOLIES. 

is  a  misfortune  for  it  and  them  which  the  Constitution  does 
not  require  to  be  remedied  by  imposing  unjust  burdens 
upon  the  public.  So  that  the  right  of  the  public  to  use 
the  defendant's  turnpike  upon  the  payment  of  such  tolls  as, 
in  view  of  the  nature  and  value  of  the  services  rendered  by 
the  company,  are  reasonable,  is  an  element  in  the  general 
inquiry  whether  the  rates  established  by  law  are  unjust  and 
unreasonable.' 

"  We  hold,  therefore,  that  the  basis  of  all  calculations  as 
to  the  reasonableness  of  rates  to  be  charged  by  a  corpora- 
tion maintaining  a  highway  under  legislative  sanction  must 
be  the  fair  value  of  the  property  being  used  by  it  for  the 
convenience  of  the  public.  And,  in  order  to  ascertain  that 
value,  the  original  cost  of  construction,  the  amount  ex- 
pended in  permanent  improvements,  the  amount  and 
market  value  of  its  bonds  and  stock,  the  present  as  com- 
pared with  the  original  cost  of  construction,  the  probable 
earning  capacity  of  the  property  under  particular  rates 
prescribed  by  statute,  and  the  sum  required  to  meet  operat- 
ing expenses,  are  all  matters  for  consideration,  and  are  to 
be  given  such  weight  as  may  be  just  and  right  in  each 
case.  We  do  not  say  that  there  may  not  be  other  matters 
to  be  regarded  in  estimating  the  value  of  the  property. 
What  the  company  is  entitled  to  ask  is  a  fair  return  upon 
the  value  of  that  which  it  employs  for  the  public  con- 
venience. On  the  other  hand,  what  the  public  is  entitled 
to  demand  is  that  no  more  be  exacted  from  it  for  the  use 
of  a  public  highway  than  the  services  rendered  by  it  are 
reasonably  worth."  x 

1  The  court  quoted  from  the  Nebraska  State  Board  of  Transpor- 
tation of  1891  to  the  effect  that  "the  railroads  in  this  State  could 
not  he  duplicated  for  a  less  sum  than  $30,000  per  mile,  taking  into 
consideration  equipments  and  depot  and  terminal  facilities."  The 
Board  expressed  the  opinion  that  the  roads  could  not  stand  any 
cut  of  local  rates,  even  figuring  their  property  "at  $30,000  per 


THE  LEGAL  ASPECTS   OF  MONOPOLY.     501 

The  Supreme  Court  closed  its  opinion  as  fol- 
lows :  — 

"  In  anticipation,  perhaps,  of  such  a  change  of  circum- 
stances, and  the  exceptional  character  of  the  litigation,  the 
circuit  court  wisely  provided  in  its  final  decree  that  the 
defendant  members  of  the  Board  of  Transportation  might, 
'  when  the  circumstances  have  changed  so  that  the  rates 
fixed  in  the  said  Act  of  1893  shall  yield  to  the  said  com- 
panies reasonable  compensation  for  the  services  aforesaid,' 
apply  to  the  court,  by  bill  or  otherwise,  as  they  might  be 
advised,  for  a  further  order  in  that  behalf.  Of  this  pro- 
vision of  the  final  decree  the  State  Board  of  Transporta- 
tion, if  so  advised,  can  avail  itself.  In  that  event,  if  the 
circuit  court  finds  that  the  present  condition  of  business  is 
such  as  to  admit  of  the  application  of  the  statute  to  the 
railroad  companies  in  question  without  depriving  them"  of 
just  compensation,  it  will  be  its  duty  to  discharge  the 
injunction  heretofore  granted,  and  to  make  whatever  order 
is  necessary  to  remove  any  obstruction  placed  by  the 
decrees  in  these  cases  in  the  way  of  the  enforcement  of  the 
statute."  1 

mile,  and  not  what  they  claimed  they  cost."  The  Board  also  said 
they  believed  a  cut  in  local  rates  would  result  in  a  rise  of  through 
rates,  as  had  been  the  result  of  a  60  per  cent  reduction  in  the  local 
rates  on  coal,  "  the  price  to  the  consumer  was  not  lowered  nor  the 
price  at  the  mines  raised." 

1  The  injunction  granted  in  the  court  below  contained  clauses 
enjoining  the  roads  from  making  any  reduction  at  all  in  their 
rates.  At  a  hearing  in  May,  the  Supreme  Court  ordered  these 
clauses  stricken  out  of  the  decree,  171  U.S.,  361. 


TIL 

STKEET    EAILWAYS. 


STEEET   EAILWAYS 


By  EDWARD  W.  BEMIS. 


In  1880  there  were  only  2,050  miles  of  street- 
railway  track  in  the  United  States,  counting  a 
mile  of  double  track  as  two  miles  of  single  track. 
There  were  no  electric  roads,  and  only  three  cable 
roads,  the  first  dating  from  1877.  At  the  close  of 
1885  there  were  only  11  cable  roads  and  no  elec- 
tric roads  in  America.  Two  electric  roads  were 
built  in  1886,  and  six  in  1887.  Because  the  fran- 
chise of  a  street  railway  in  Richmond,  Va.,  per- 
mitted the  adoption  of  any  form  of  traction,  that 
city  was  selected  to  prove  the  practicability  of 
electric  cars  for  a  whole  street-railway  system, 
with  its  curves  and  grades.  On  June  30,  1890, 
there  were  114  electric  roads,  48  cable  roads,  and 
597  other  street  railways  in  this  country.  The 
electric  roads  had  914  miles  of  track,  the  cable 
roads  had  283,  the  steam  dummy  lines  524,  and 
those  with  horse  or  mule  traction  4,062  miles. 

The  estimated  cost  of  these  roads,  by  which 
was   probably  meant  the  outstanding   securities, 

505 


506  MUNICIPAL  MONOPOLIES. 

according  to  the  census,  was  $389,357,289,  and 
the  employees  were  70,764.  In  September,  1898, 
the  president  of  the  New  York  Street  Railway 
Association,  in  his  annual  address,  estimated  the 
present  street  railways  as  having  over  16,000 
miles  of  track,  170,000  employees,  and  an  "in- 
vested capital "  of  over  $850,000,000.  The  Amer- 
ican Street  Railway  Directory,1  issued  at  about 
the  same  time,  gave  some  statistics  of  909  electric 
roads  with  1-1,674  miles  of  track,  21  cable  roads 
with  486  miles,  31  steam  dummy  lines  with  618 
miles,  and  113  horse-car  lines  with  689  miles  of 
track.  These  1,074  roads,  with  16,467  miles  of 
track,  had  $1,507, 596,047  of  stock  and  bonds 
outstanding,  or  over  $91,000  per  mile,  and  had 
48,209  cars,  or  about  three  per  mile. 

It  is  the  estimate  of  a  carefully  prepared  article 
in  The  Street  llaihvay  Journal  for  October,  1897, 
that  the  American  street  railways  are  now  earning 
"at  least  $150,000,000  gross;  and  it  is  probable 
that  the  net  earnings  applicable  to  return  on 
investment  as  figured  by  the  companies  themselves 
would  be  between  40  and  50  million  dollars."  2 

1  Published  at  150  Nassau  Street,  New  York  City. 

2  In  confirmation  of  this  estimate  of  .$150,000,000  of  annual 
business,  it  may  be  noted  that  the  street-railway  receipts  in  1896 
in  the  three  States  of  Massachusetts,  New  York,  and  Pennsyl- 
vania, were  $03,881,598,  although  these  States  had  less  than  one- 
third  of  the  total  street-railway  mileage  of  the  country.  Four 
cities  in  other  States — Chicago,  St.  Louis,  San  Francisco,  and 
Cincinnati  —  would  have  raised  the  total  gross  receipts  to  over 


STREET  RAILWAYS.  507 

The  rapidly  developing  magnitude  of  this  form 
of  transportation  may  be  illustrated  by  a  com- 
parison with  the  steam  railroads  of  the  country. 
The  passenger  earnings  upon  the  latter,  for  the 
year  ending  June  30,  1897,  were  $314,859,516, 
according  to  the  Interstate  Commerce  Commission, 
or  but  little  over  twice  the  receipts  of  the  street 
railways.  The  passengers  carried  upon  our  steam 
railroads  in  1897-1898  paid  an  average  of  50  cents 
for  an  average  ride  of  24.8  miles.  The  number 
of  passengers  upon  the  street  railways  must  have 
exceeded  the  number  on  the  steam  roads  at  least 
five-fold,  in  order  to  have  produced  a  revenue  of 
one-half  that  received  by  the  latter  from  its  pas- 
senger business.  The  net  income  from  operation 
per  mile  of  track,  above  operating  expenses,  for 
all  kinds  of  traffic  upon  the  steam  railroads  during 
1896-1897,  was  82,050,  and  upon  the  street  rail- 
ways about  83,300.  This  will  explain  why  it  is  that 
the  street  railways  float  stock  and  bonds  of  over 
890,000  per  mile,  while  the  steam  roads,  with  all 
their  watered  stock,  have  only  $59,610  per  mile. 

It  may  be  further  noted  that  the  street  railways 
have  twice  as  many  passenger-cars  as  the  steam 
railroads.1 

$90,000,000;   and  there  are  fully  25  other  large  cities  with  total 
gross  receipts  of  over  $25,000,000. 

1  The  latter  had  25,275  on  June  30,  1898,  according  to  the 
report  of  the  Interstate  Commerce  Commission ;  and  the  former 
were  running  48,209  cars,  as  ahove  stated. 


508  MUNICIPAL  MONOPOLIES. 

The  average  number  of  employees  of  the  street 
railways — about  170,000 — is  one-fifth  of  the 
number  employed  in  both  passenger  and  freight 
traffic  upon  the  steam  roads. 

The  street  railroads  are  fast  outstripping  the 
steam  roads  in  their  growth.  Between  1887  and 
1896  the  gross  income  of  the  street  railways  of 
New  York  State  increased  60.38  per  cent,  .while 
the  increase  in  the  case  of  the  steam  railroads  was 
only  46.09  per  cent.1  In  Massachusetts  for  the 
same  time  the  percentages  of  growth  were  132.6 
and  60.4  respectively.  Similar  figures  could  be 
quoted  for  other  States. 

Every  one  admits  the  benefits  of  the  rapid  ex- 
tension of  street  railways.  They  are  revolution- 
izing life  in  our  cities  by  enabling  an  enormous 
population  to  have  homes  in  healthy  and  pleasant 
suburbs. 

A  resident  of  Hull  House,  Chicago,  in  one  of 
the  great  centers  of  Chicago  poverty,  remarks  that 
the  workers  at  the  settlement  had  labored  for 
years  with  only  moderate  success  to  secure  better 
sanitary  conditions  for  the  foreign-born  population 
about  them,  when  suddenly  street-railway  exten- 
sions induced  5,000  of  the  people  to  move  to 
healthful  suburbs.  It  is  with  full  recognition  of 
the  benefits  of  our  street  railroads  that  one  may 
still  call  attention  to  possible  improvements. 

1  See  Street  Railway  Journal,  October,  1897. 


STREET  RAILWAYS.  509 

PROFITS. 

It  is  established  beyond  question  that  these 
railways  are  an  absolute  monopoly  so  far  as  com- 
petition with  other  railroads  is  concerned,  although 
the  bicycle  has  proved  a  considerable  check  upon 
railway  profits.  Elevated  roads  in  the  few  cities 
large  enough  to  justify  them  are  tending  to  con- 
solidation with  the  surface  lines,  as  already  ac- 
complished in  Boston,  and  virtually  achieved  in 
a  considerable  portion  of  Chicago. 

It  would  be  expecting  too  much  to  count  upon 
the  refusal  of  so  complete  a  monopoly  to  make 
the  most  of  its  opportunities  for  profits  far  in 
excess  of  those  secured  in  competitive  business. 
It  is  rather  the  fault  of  communities,  if  they  allow 
the  earning  of  monopoly  profits  by  corporations 
receiving  the  gift  of  the  public  streets. 

The  street  railway  business  requires  far  less 
managerial  ability  than  almost  any  other  kind  of 
business  of  the  same  magnitude  ;  since  there  are 
no  competitors  to  fear,  and  no  questions  as  to  the 
precise  shade  of  color  or  quality  of  wares  that  will 
best  meet  the  fastidious  taste  of  the  buyer  in  a 
competitive  market.  The  simple,  plain  service  of 
transportation  is  the  only  thing  to  be  furnished. 
Scarcely  such  a  thing  as  good  will  may  be  said  to 
exist  in  the  ordinary  commercial  sense,  except  in 
dealings  with  the  city  government.     People  will 


510  MUNICIPAL  MONOPOLIES. 

ride  unci  must  ride,  whether  they  like  a  company 
or  hate  it.  One  might  reasonably  expect,  there- 
fore, under  proper  relations  between  the  people  and 
these  railway  companies,  that  their  profits  would  be 
as  much  less  than  those  of  the  average  cotton-mill 
as  their  risks  and  requirement  of  ability  are  infe- 
rior to  those  demanded  by  the  latter.  No  under- 
estimate of  the  purely  engineering  abilities  re- 
quired for  the  development  of  various  forms  of 
electric  traction  is  here  intended,  but  payment  for 
such  abilities  is  mostly  reckoned  in  the  salary  list 
as  part  of  the  operating  expenses  rather  than  of 
the  profits. 

To  be  sure,  the  profits  of  street  railways,  espe- 
cially of  those  that  introduced  cable  or  electric 
traction  before  the  great  fall  in  prices  in  those  lines 
about  1893,  are  much  less  than  would  at  first  sight 
appear.  Boards  of  directors  are  responsible  for 
this  current  impression.  They  have  often  paid  in 
large  dividends  upon  a  grossly  inflated  capitaliza- 
tion what  should  have  been  reserved  as  a  depreci- 
ation and  sinking-fund  for  the  reduction  of  the 
capital  account  and  the  changes  in  motive  power 
to  conform  with  changes  in  structural  values  and 
with  the  development  of  invention.  Now,  how- 
ever, that  some  stability  in  the  price  of  electric 
equipment  has  begun  to  appear,  it  is  the  opinion 
of  a  very  able,  though  unsigned,  article  in  the 
Street  Railway  Journal  for  April,  1897,  that  the 


STREET  RAILWAYS.  511 

official  reports  of  the  operating  expenses  of  all 
the  street  railways  of  Massachusetts,  New  York, 
and  Pennsylvania,  although  perhaps  not  always  in- 
eluding  sufficient  allowance  for  depreciation,  are 
yet  as  great  as  would  he  the  cost  of  street-railway 
transportation,  even  if  depreciation  were  added,  if 
the  equipment  were  all  thoroughly  modern.  The 
statement  is  worth  quoting  verbatim. 

"  It  is  difficult  to  say  what  additions  should  be  made  to 
the  operating  expenses  as  reported  officially,  in  order  to  ob- 
tain approximately  correct  figures  for  depreciation  ;  but  it 
is  probably  true  that  with  the  best  modern  road-bed  and 
equipment  known  to-day,  an  equal  car-service  could  be 
given  on  the  same  track  mileage,  and  all  allowances  made 
for  depreciation  on  a  conservative  basis,  at  figures  little,  if 
any,  greater  than  those  quoted  here," 

i.e.,  than  the  figures  in  the  State  reports,  and  in 
the  annual  volume  known  as  American  Street 
Railway  Investments. 

The  leading  writer  upon  street  railway  ques- 
tions in  America,  and  an  acknowledged  authority, 
Mr.  Edward  E.  Higgins,  declared  in  1895,  in  his 
book  on  Street  Railway  Investments  (p.  77),  that 
in  cities  of  100,000  to  500,000  inhabitants,  net 
earnings  of  15  to  25  per  cent  "  on  the  actual  net 
cost  of  duplicating  the  tangible  assets  "  were  to  be 
expected. 

With  respect  to  street  railways  in  still  larger 
cities,  Mr.  Higgins  writes :  — 


512  MUNICIPAL  MONOPOLIES. 

"  The  properties  in  this  class  are  among  the  safest  and 
most  profitable  in  the  entire  range  of  capital  investment. 
Defaults  in  interest  charges  are  almost  unknown  ;  and  divi- 
dends on  stocks  have  been,  with  few  exceptions,  regular 
and  satisfactory,  in  spite  of  extreme  over-capitalization  of 
costs"  (p.  81). 

Professor  Frederick  W.  Speirs  of  the  Drexel 
Institute,  Philadelphia,  in  his  hook  on  The  Street 
Railway  System  of  Philadelphia,1  states  (p.  43)  :  — 

"  The  present  market  value  of  the  stock  of  all  the  street 
railway  companies  of  Philadelphia  exceeds  $120,000,000; 
the  amount  of  paid  capital  stock,  including  that  of  the  Trac- 
tion Company,  being  in  the  vicinity  of  $50,000,000 ;  while 
the  total  cost  of  the  construction  and  equipment  of  the 
roads  which  the  stocks  represent  is  about  $36,000,000." 

He  shows  that  after  deducting  the  large  amount, 
about  $20,000  per  mile,  required  for  paving  the 
streets  from  curb  to  curb,  as  the  law  compels  in 
Philadelphia,  the  companies  reported  to  the  State 
a  cost  of  construction  of  only  $56,300  per  mile  for 
the  447  miles  of  track.  The  comparison  between 
the  total  cost,  with  paving,  of  $76,400  per  mile, 
with  the  capitalization  of  $242,280  per  mile,  is 
certainly  interesting ;  yet  this  was  then  exceeded, 
according  to  Professor  Speirs,  by  three  other 
surface  railways  as  follows :  — 

i  Published  in  1897,  by  the  Johns  Hopkins  University  Press. 


STREET  RAILWAYS.  513 

w.™„  ~t  /-»„ ».  Miles  Total        Capitalization 

Name  of  Company.  of  Track.    Capitalization,    per  Mile. 

Union  Traction  Company,  447      $108,301,800       $242,200 

Philadelphia, 
Metropolitan,  New  York,  189  54,884,000         280,900 

Capital  Traction  Company,  36  12,000,000         333,300 

Washington,  D.C., 
Third  Avenue  Company,  28  14,000,000         500,0001 

New  York, 

There  is  reason  for  larger  costs  of  construction 
in  New  York  and  Washington  than  in  Philadel- 
phia, although  most  of  Philadelphia's  streets  are 
too  narrow  for  double  track  and  for  the  economies 
connected  therewith.  On  the  other  hand,  the  cost 
in  Philadelphia,  as  reported  to  the  Philadelphia 
Secretary  of  State,  is  doubtless  original  cost,  and 
therefore  is  much  higher  than  the  present  cost  of 
duplication.  In  the  "  Report  of  the  Special  Com- 
mittee of  the  City  Council  on  the  Street  Railways 
of  Chicago,"  commonly  called  the  Harlan  Report, 
published  in  1898,  figures  are  given  illustrative  of 
the  high  profits  and  over-capitalization  of  the  three 
great  systems  of  that  city,  —  the  Chicago  City  Rail- 
way on  the  South  Side,  the  North  Chicago  Street 
Railroad  on  the  North  Side,  and  the  West  Chicago 
Street  Railroad  on  the  West  Side.  As  these  figures 
are  largely  based  on  the  report  of  the  writer  to  the 
Illinois  Bureau  of  Labor  Statistics  for  1896,  which 
has  never  been  seriously  disputed,  they  may  be 
taken  as  approximately  correct.     It  appears  that 

1  Professor  Speirs  gives  it  $493,000,  evidently  a  misprint. 


514  MUNICIPAL   MONOPOLIES. 

the  487  miles  of  street  railway  in  these  three  sys- 
tems which  can  be  duplicated  for  about  $59,250 
per  mile,  or  828,858,234,  have  outstanding  securi- 
ties of  a  par  value  of  $63,258,300,  and  of  a  market 
value  of  $91,612,445. 

As  an  interesting  side  light  upon  the  amount  of 
water  in  these  companies,  reference  may  be  made 
to  the  report  of  Mr.  F.  S.  Pearson,  the  well-known 
engineer  of  the  Metropolitan  Railway  Company  of 
New  York,  to  the  city  of  Liverpool,  upon  the  cost 
in  1897  of  a  complete  new  street-railway  system 
of  the  very  highest  character.  He  estimated  that 
an  overhead  electric  line  of  70  miles  of  track  and 
300  cars,  or  4.3  cars  per  mile,  with  rails  of  the 
unusual  weight  of  110  lbs.  to  the  yard,  through- 
out, would  cost,  aside  from  land,  ,£911,000,  or 
$63,248  per  mile.  An  increase  of  the  cars  to  400, 
or  5.7  per  mile,  would  increase  the  cost  to  about 
$70,000.  He  estimated  that  a  road  of  120  miles 
and  with  400  cars,  or  with  3  cars  per  mile,  could 
be  built  for  £1,329,000,  or  $52,825  per  mile.  He 
also  estimated  that  a  road  of  70  miles,  with  slotted 
conduit  system,  —  i.e.,  with  the  trolley  wire  in  a  con- 
duit underneath  the  track,  —  would  cost,  with  300 
cars,  £1,285,500,  or  $89,250  per  mile,  and  about 
$7,000  more  per  mile  for  400  cars  ;  while  a  road  of 
120  miles  and  400  cars  could  be  built,  aside  from 
land,  for  £1,917,000,  or  877,639  per  mile. 

The  track  and  equipment  of  many  of  the  street- 


STREET  RAILWAY S.  515 

railway  lines  in  our  largest  cities  are  very  much 
inferior  to  the  system  proposed  for  Liverpool,  in 
weight  of  rail,  size  of  car,  etc.,  while  in  New  York 
City  many  of  the  lines  are  cheap  horse-car  lines. 
Aside  from  the  Broadway  cable  line  of  New  York 
City,  and  some  underground  electric  conduit  sys- 
tems, few  American  companies  would  require  for 
duplication  more  than  $75,000  a  mile  ;  and  outside 
of  New  York,  -Washington,  and  Boston  very  few 
indeed  would  require  more  than  $50,000  a  mile, 
even  including  the  value  of  the  land  needed  for 
power  and  car  houses.  In  cities  below  100,000 
in  population,  existing  lines  could  be  duplicated 
usually  for  $20,000  to  $45,000  per  mile,  according 
to  the  character  of  the  road-bed,  amount  of  equip- 
ment, etc.  These  figures  are  based  on  full  and 
official  data  of  many  companies  which  the  writer 
has  been  permitted  to  examine. 

In  1896  Mr.  William  R.  Hopkins,  Ph.D.,  an 
attorney  and  a  member  of  the  City  Council  of 
Cleveland,  Ohio,  in  a  valuable  work  published 
by  the  American  Economic  Association  on  "The 
Street  Railway  Problem  of  Cleveland,"  estimated 
that  the  180  miles  of  street  railway  in  that  city 
could  be  duplicated  for  $39,144  per  mile,  or  a  total 
of  $7,045,874. l  Yet  in  1896  the  joint  capital  of 
the    Cleveland    City   Railway   Company  and   the 

1  Dr.  Hopkins  gives  $6,974,403,  but  his  items  of  cost  sum- 
marize as  iu  text. 


516  MUNICIPAL  MONOPOLIES. 

Cleveland  Electric  Railway  Company,  he  finds  to 
be  $24,549,000,  or  about  $136,000  per  mile. 

As  a  result  of  the  large  profits  of  street  rail- 
ways, there  has  come  a  demand  for  lower  fares 
and  larger  taxes,  while  out  of  the  monopolistic 
character  of  this  necessity  of  modern  city  life,  and 
the  absolute  dependence  of  the  business  on  public 
grants  of  power  in  the  streets,  have  come  the  most 
demoralizing  relations  with  city  and  State  govern- 
ments. Of  these  two  problems,  —  the  financial 
and  the  political,  —  the  latter  is  by  far  the  worst. 
Until  it  is  solved,  good  municipal  government  is 
an  impossibility.  Only  Massachusetts  and  some 
parts  of  Europe  have  done  much  toward  a 
solution. 

From  several  American  cities,  however,  some- 
thing can  be  learned  as  to  the  possibility  of  low 
fares  or  large  taxes.  From  Massachusetts  very 
valuable  lessons  can  be  learned  as  to  how  to  keep 
down  capitalization,  and  so  render  further  meas- 
ures of  public  control  easier.  Finally,  from  Ger- 
many may  be  learned  what  sort  of  franchises 
should  be  granted,  and  from  England  how  the 
most  satisfactory  of  all  solutions,  where  practica- 
ble, —  public  ownership  and  operation,  —  is  now 
rapidly  coming  to  the  front.1 

1  In  preparing  this  review,  which  must  be  brief,  much  use  has 
been  made  of  the  reports  of  cities  referred  to,  the  reports  since 
1885  of    the  Massachusetts   Railroad    Commission,  the  annual 


STREET  RAILWAYS.  517 

Baltimore. 

On  July  12,  1859,  the  first  Baltimore  horse-car 
was  run ;  and  Mayor  Swann  induced  the  Council 
to  insist  on  five-cent  fares,  free  transfers,  a  $20 
tax  annually  on  each  car  in  regular  service,  and  ;i 
payment  of  one-fifth  of  the  gross  receipts  to  the 
city  for  a  grand  boulevard  or  public  parks.  Dur- 
ing the  war  the  rates  of  fare  were  raised,  and 
afterwards  the  companies  refused  to  reduce  to  five 
cents  unless  the  State  Legislature  would  reduce 
the  park  tax  from  20  per  cent  to  9  per  cent  on 
gross  receipts,  which  was  done.  The  local  Legis- 
lature also  reduced  the  car  license  from  $20  to  $5. 
The  city,  nevertheless,  secured  1248,000  of  rev- 
enue from  the  business  of  the  companies  in  the 

"American  Street  Railway  Investments,"  published  by  The 
Street  Railway  Publishing  Company,  Havemeyer  Building  (New 
York  City) ;  Garcke's  Manual  of  (British)  Electrical  Undertak- 
ings, for  1898  (P.  S.  King  &  Sons,  London) ;  the  (British)  Munici- 
pal Year  Book  for  1897  and  for  1898  (Edward  Lloyd,  12  Salisbury 
Square,  London) ;  London,  the  well-known  organ  of  the  British 
municipal  movement ;  The  Street  Railway  Journal  (New  York) ; 
special  studies,  such  as  the  articles  in  Municipal  Affairs  for  Sep- 
tember, 1897,  by  John  De  Witt  Warner  and  Edward  E.  Higgins, 
and  others  on  Philadelphia,  Cleveland,  Chicago,  etc.,  mentioned 
in  their  appropriate  places;  and  last,  but  by  no  means  least,  the 
recent  report  of  the  Massachusetts  Special  Committee,  appointed 
by  Governor  Wolcott  to  investigate  the  street-railway  question 
in  America  and  Europe.  Although  the  report  is  in  many  places 
very  misleading,  and  biased  against  municipal  operation  or  low 
fares,  it  is  the  fullest  survey  of  the  whole  subject  that  we  have. 
Its  summary  of  American  and  European  franchise  law  in  Appen- 
dices A  and  D  is  especially  useful  to  the  investigator. 


518  M  I ' XICIPA  L   MONO POLIES. 

old  city  limits  in  1897.  In  certain  large  annexed 
portions  of  the  city,  the  rate  is  only  six-tenths  of 
one  per  cent,  until  1900,  when,  by  the  universal 
application  of  the  nine  per  cent  tax,  the  total 
park  revenue  will  be  considerably  increased. 

Commenting  on  this,  the  Special  Committee  of 
Massachusetts  appointed  to  investigate  the  street- 
railway  question,  reported  in  February,  1898,  that 
no  city  on  this  continent  had  received  cash  returns 
from  its  railways  approaching  that  of  Baltimore. 
The  committee  declared  that  it  would  venture  no 
predictions  as  to  the  ability  of  the  Baltimore  com- 
panies to  pay  the  tax,  but  it  makes  the  following 
statement :  1  — 

"  Those  representing  the  railway  companies  state  that 
the  financial  burdens  imposed  by  the  municipality  are  un- 
reasonably heavy ;  that  when  it  is  required  to  renew  their 
equipment,  it  will  be  impossible  for  them  to  pay  such  heavy 
tax  burdens.  One  company,  the  Baltimore  Consolidated, 
paid  last  year  less  than  two  per  cent  dividends  on  a  capital- 
ization of  $8, 000,000.  Those  interested  in  Baltimore  rail- 
way properties  stated  that,  unless  the  business  should 
increase  very  largely,  the  railway  companies  ought  not  to 
be  expected  to  pay  such  heavy  returns  to  the  municipality." 

This  statement  illustrates  the  bias,  or  what 
some    would    call    the    "  conservatism,"    of    this 

1  "  Report  of  the  Special  Committee  Appointed  to  Investigate 
the  Relation  between  Cities  and  Towns  and  Street  Railway  Com- 
panies," pp.  114-115.  This  report  will  henceforth  be  designated 
The  Massachusetts  Special  Street  Railway  Report. 


STREET  RAILWAYS.  519 

famous  committee,  as  a  little  examination  will 
show.  It  is  true  that  the  Baltimore  Consolidated 
Railway  Company  paid  only  two  per  cent  on  its 
stock  in  1896,  although  it  earned  3.6  per  cent  in 
1897,  and  is  likely  to  earn  still  more  in  the  future, 
because  the  per  cent  of  operating  expenses  to  gross 
receipts  fell  from  51.9  in  1896  to  44  in  1897. 
But  the  important  facts  not  stated  by  the  Massa- 
chusetts Committee  are  that  the  company  earns 
and  pays  interest  on  about  $58,000  of  bonds  per 
mile  of  track.  That  it  does  not  earn  large 
dividends  on  nearly  $50,700  a  mile  of  stock  is 
not  strange  when  we  consider  that  the  road  does 
20  per  cent  less  business,  and  presumably  runs 
about  20  per  cent  less  car-miles  per  mile  of  track, 
than  the  Springfield  (Mass.),  Railway,  which 
can  be  duplicated  for  under  $32,000  per  mile. 
The  equipment  in  cars  of  the  Baltimore  road  is 
only  50  per  cent  more  per  mile  than  that  of  the 
Springfield  road.  It  certainly  cannot  complain, 
therefore,  if  it  earns  from  5  per  cent  to  6  per  cent 
on  $58,000  of  bonds,  and  2  per  cent  to  4  per 
cent  on  $50,000  more  of  stock. 

Why,  moreover,  did  the  Massachusetts  Special 
Report  omit  all  reference  to  the  other  great  Balti- 
more road,  the  Baltimore  City  Passenger  Railway 
Company,  which,  in  addition  to  interest  on  $52,766 
of  bonds  per  mile  of  track,  has  averaged  ever  since 
1896  more  than  10.5  per  cent  dividends  on  as 


520  MUNICIPAL  MONOPOLIES. 

much  more  of  stock,  aside  from  a  25  per  cent 
stock  dividend  in  1894?  Its  percentage  of  operat- 
ing expenses  to  gross  receipts,  consequent  upon 
the  introduction  of  electric  traction,  fell  from  83.9 
per  cent  in  1893  to  62.4  per  cent  in  1897,  or  one 
cent  per  passenger. 

Philadelphia. 

In  seeking  for  valuable  lessons  from  such  Amer- 
ican cities  as  can  furnish  such,  attention  is  at- 
tracted to  Philadelphia.  Although  the  State  law 
places  no  restrictions  upon  the  length  of  life  of 
street  railways,  it  requires  companies  to  get  the 
consent  of  the  city  government  before  constructing 
their  roads.  Ever  since  the  first  roads  were  con- 
structed in  1857,  all  Philadelphia  railways,  when 
applying  for  franchises,  have  been  forced  to  agree 
to  observe  all  ordinances  made  by  the  city  for 
their  regulation.  In  many  cases  special  reference 
has  been  made  to  an  ordinance  of  1857.  It  is, 
therefore,  the  opinion  of  the  leading  student  of 
the  Philadelphia  situation,  who  has  been  quoted 
already,  Professor  Speirs  of  Drexel  Institute,  that 
all  franchises  are  subject  to  the  ordinance  of  1857, 
which  has  never  been  repealed,  and  which  provides 
relative  to  certain  franchises  then  up  for  consider- 
ation. "  The  city  of  Philadelphia  reserves  the 
right  at  any  time  to  purchase  the  same  by  paying 


STREET  RAILWAYS.  521 

the  original  cost  of  said  road  or  roads  and  cars  at 
the  fair  valuation  ;  and  any  such  company  or  com- 
panies refusing  to  consent  to  such  purchase  shall 
forfeit  all  privileges,  rights,  or  immunities  they 
may  have  acquired  in  the  use  or  possession  of  any 
of  the  highways  aforesaid."  The  law  committee 
of  the  City  Councils,  as  the  upper  and  lower 
branch  of  the  Legislative  Department  are  called, 
thus  reported  recently :  l  — 

"It  is  a  fact  that  Section  8  of  the  ordinance  of  1857  has 
stood  there  unchallenged,  unamended,  unrepealed.  As  each 
road  has  been  granted  additional  privileges  by  Councils,  it 
has,  by  its  own  agreement,  made  itself  amenable  and  liable 
to  its  provisions.  It  is  an  integral  part  of  every  grant  to 
occupy  a  street  for  railway  purposes.  Every  dollar  that  has 
been  spent  upon  every  railroad  in  Philadelphia  has  been 
spent  with  full  knowledge  of  its  existence.  Changes  in 
corporations  have  taken  place,  new  companies  have  been 
formed  under  new  laws,  improved  methods  of  transit 
adopted,  new  systems  of  pavement  introduced ;  some  of  the 
companies  have  filed  statements  of  cost  as  required  by  it, 
and  all  subject  to  this  apparently  plain,  direct  contract  with 
the  city  of  Philadelphia,  that  they  should  surrender  all  under 
the  conditions  of  the  Section.  A  magic  spell  seems  to 
have  been  over  all  for  nearly  forty  years,  —  railway  man- 
agers and  city  officials  alike,  —  to  have  permitted  so  far- 
reaching  and  important  an  enactment  to  lie  totally  neglected 
and  apparently  forgotten." 

Commenting  on  the  condition  of  affairs,  Profes- 
sor Speirs  thus  writes  :  — 
1  "  Street  Railway  System  of  Philadelphia,"  by  Speirs,  p.  90, 


522  MUNICIPAL   MONOPOLIES. 

"  In.  view  of  the  large  financial  interest  involved,  it  is 
apparent  that  when  the  interpretation  of  the  clause  is  de- 
manded from  the  courts,  the  resources  of  legal  subtlety  will 
be  exhausted  in  the  attempt  to  secure  a  decision  denying 
the  right  of  purchase,  or  imposing  terms  that  will  make  it 
impossible  for  the  city  to  realize  the  advantages  of  lower 
fare." 

In  the  year  ending  June  30,  1898,  this,  the 
largest  street-railway  property  in  the  world,  had 
gross  receipts  of  $10,860,542  on  its  450  miles  of 
track,  or  $24,134  per  mile.  After  paying  in  li- 
censes and  taxes  8894,737,  or  8.2  per  cent  of  its 
receipts,  this  company  had  total  operating  expenses 
of  only  49.27  per  cent  of  its  receipts.  The  net 
receipts  thus  for  depreciation  and  profit  were 
$12,243  a  mile,  or  over  20  per  cent  on  the  prob- 
able cost  of  duplication. 


New  Yoek  City. 

New  York  City  franchises  have  been  so  fully 
described  in  Chapter  V.  that  only  the  most  recent 
facts  need  be  cited.  In  The  Street  Railway  Jour- 
nal for  November,  1898,  is  given  a  valuable  official 
summary  of  the  results  of  the  recent  introduction  of 
the  underground  electric  conduit  system.  .In  the 
three  months  ending  Sept.  30,  1898,  substantially 
an  equal  amount  of  traffic  —  about  $1,000,000 
worth  —  was  carried  over  the  horse,  the  electric, 


STREET  RAILWAYS.  523 

and  the  cable  railways  of  the  Metropolitan  system, 
although  the  receipts  were  $39,000  a  mile  on  the 
cable  roads,  $17,000  a  mile  on  the  electric,  and 
$8,000  on  the  horse-car  lines.  Handicapped  as  were 
the  electric  lines  in  comparison  with  the  cable,  the 
former  had  operating  expenses  of  only  38.6  per 
cent  of  the  receipts,  the  cable  52.7  per  cent  of  the 
receipts,  and  the  horse-car  lines  62.1  per  cent,  or 
an  average  for  all  of  50.9  per  cent.  In  other 
words,  the  underground  electric  system  in  New 
York  will  carry  a  passenger  for  1.93  cents,  aside 
from  fixed  charges,  the  cable  for  2.64  cents,  and 
the  horse-cars  for  3.1  cents.  The  receipts  and 
expenditures  per  car-mile  were  as  follows :  — 


Receipts,  per  Operating  Expenses 

Car-Mile.  per  Car- Mile. 

Cable,                      33.27  17.55 

Electric,                  26.03  10.06 

Horse-car,               28.82  17.89 


The  engineer  of  this  company,  Mr.  F.  S.  Pear- 
son, in  his  report  to  Liverpool  already  quoted, 
estimated  the  operating  cost  per  car-mile  of  the 
electric  conduit  system  as  8  cents,  and  of  the  over- 
head trolley  system  as  7.36  cents  per  car-mile. 
The  operating  expenses  in  New  York  are  thus 
only  one-fourth  more  than  Mr.  Pearson's  estimate 
for  Liverpool,  and  the  difference  between  the  ex- 
pense of  operation  of  the  trolley  and  the  conduit 
is  only  about  8  per  cent.     He  estimated,  however, 


524  MUNICIPAL  MONOPOLIES. 

as  already  shown,  that  the  cost  of  construction 
of  the  latter  was  about  40  per  cent  greater. 

The  excess  of  gross  receipts  above  operating 
expenses  aside  from  taxes  was  $10,784  per  mile 
of  track  in  1893,  and  $27,696  in  1897;  while  the 
taxes  the  latter  year  were  $2,507  in  this  Metro- 
politan system,  which  includes  four-fifths  of  the 
surface  mileage  of  the  city. 

But  it  does  not  include  the  most  heavily  cap- 
italized, independent  road  in  America,  the  Third 
Avenue,  whose  28  miles  of  cable  earn  for  the 
owners  5  per  cent  on  $5,000,000  of  bonds,  i.e., 
on  $175,439  a  mile;  and  8  to  10  per  cent  yearly 
on  $10,000,000  of  stock,  i.e.,  on  $350,877  a  mile. 
The  excess  of  receipts  over  operating  expenses  and 
taxes  —  the  latter  being  only  4  per  cent  of  the 
receipts  —  permits  this  tremendous  capitalization 
of  $526,316  per  mile,  for  the  net  earnings  in  1897 
were  $38,422  per  mile. 

The  10.2  miles  of  track  of  the  Broadway  cable 
line  belongs  to  the  Metropolitan  Company.  The 
Broadway  capitalization  exceeds  that  of  the  Third 
Avenue,  being  $1,151,962  per  mile,  and  is  un- 
doubtedly the  most  profitable  surface  line  in  the 
world. 

Mr.  Robert  P.  Porter,  in  Appendix  E  of  the 
Massachusetts  Special  Street  Railway  Report,  as- 
serts that  the  average  fare  on  the  Metropolitan 
system  is  "about  three  and  three-quarters  cents 


STREET  RAILWAYS.  525 

per  passenger,  after  taking  into  account  the  trans- 
fers," and  says  this  would  not  carry  much  over 
three  miles  in  Glasgow.  But  every  New  York 
passenger,  whether  he  wishes  a  transfer  or  not, 
must  pay  five  cents,  for  which  in  the  Scotch  city 
one  can  ride  between  four  and  five  miles,  or  much 
farther  probably  than  the  average  ride  in  New 
York,  where  a  large  portion  of  the  surface  railway 
traffic  is  under  three  miles. 

Washington,  D.C. 

The  chief  advances  made  by  Washington,  and 
they  are  noteworthy,  are  in  the  Act  of  Congress  of 
June  10,  1896,  providing  for  free  transfers  among 
the  companies  in  the  District  of  Columbia,  the 
sale  of  six  tickets  for  25  cents,  prohibition  of  horse 
and  overhead  wires,  sale  of  all  new  stock  at  the 
market  price,  and  as  in  the  case  of  bonds,  to  pay 
merely  for  extensions  or  change  of  motive  power, 
for  the  grooved  rail  everywhere  on  a  level  with 
the  pavement,  and  for  an  annual  report,  sworn  to 
by  the  president  and  treasurer  of  each  railway,  to 
the  Senate  and  to  the  House  of  Representatives, 
before  Feb.  1  of  each  year,  relative  to  the  previous 
calendar  year.  The  items  which  this  report  must 
contain  are  so  important  as  to  deserve  a  place  here. 

"  Such  report  shall  state  the  amount  of  capital  stock, 
with  a  list  of  the  stockholders  and  the  amount  of  stock  held 


526  MUNICIPAL   MONOPOLIES. 

by  each;  the  amount  of  capital  stock  paid  in;  the  tula  I 
amount  of  funded  debt ;  the  amount  of  floating  debt  ; 
amount  of  dividends  declared ;  cost  of  road-bed  and  super- 
structure, including  iron  ;  cost  of  land,  buildings,  and  fix- 
tures, including  land  damages  ;  cost  of  cars,  horses,  harness, 
and  motors  and  other  machinery;  total  cost  of  road  and 
equipment ;  length  of  road  in  miles ;  length  of  double 
track,  including  sidings ;  weight  of  rail  by  the  yard ;  the 
number  of  cars  and  of  horses ;  the  number  of  motors ;  the 
total  number  of  passengers  carried  in  cars ;  the  average 
time  consumed  by  passenger  cars  in  passing  over  the  road ; 
repairs  of  road-bed  and  railway,  including  iron,  and  repairs 
of  buildings  and  fixtures  ;  total  cost  of  maintaining  road 
and  real  estate  ;  cost  of  general  superintendence,  salaries 
of  officers,  clerks,  agents,  and  office  expenses ;  wages  paid 
conductors,  drivers,  engineers,  and  motor-men  ;  water  and 
other  taxes ;  damages  to  persons  and  property,  including 
medical  attendance  ;  rents,  including  use  of  other  roads  ; 
total  expense  of  operating  road  and  repairs  ;  receipts  from 
passengers  ;  receipts  from  all  other  sources,  specifying  what, 
in  detail ;  total  receipts  from  all  sources  during  the  year ; 
payments  for  maintenances  and  repairs  ;  payments  for  in- 
terest ;  payments  for  dividends  on  stock,  amount  and  rate 
per  centum ;  total  payments  during  the  year ;  the  number 
of  persons  injured  in  life  and  limb ;  the  cause  of  the  injury, 
and  whether  passengers,  employees,  or  other  persons." 

Unlike  some  reports  to  city  and  State  officials, 
these  reports  are  public  property ;  and  much,  if  not 
all,  of  the  details  are  furnished  in  printed  slips 
to  all  applicants  by  the  clerk  of  the  Senate  and 
of  the  House.  The  law,  however,  might  well  go 
farther,  and  provide  for  public  examination  and 


STREET  BAIL  WAYS.  527 

audit  of  the  accounts  of  these  quasi-public  corpora- 
tions, and  better  methods  of  exercising  the  control 
over  capitalization  above  mentioned. 

In  the  report  to  Congress  for  1897,  the  Metro- 
politan Railroad  Company  gives  figures  which  may 
be  compared  with  those  just  given  for  New  York 
and  Liverpool.  Its  22  miles  of  underground  elec- 
tric conduit  have  13.7  cars  per  mile,  and  carried, 
in  1897,  16,861,107  passengers,  or  766,414  per 
mile  —  a  heavy  traffic.  With  83  lb.  rails,  it  re- 
ports :  "  There  has  been  expended,  on  account  of 
construction,  equipment,  etc.,  for  the  new  under- 
ground electric  system  to  date,  including  Columbia 
extension,  $2,326,454.06."  This  is  $105,660  per 
mile.  The  capital  in  excess  of  this,  or  $1,273,546, 
must  represent  real  estate  and  the  junk-pile.  The 
average  fares  are  only  4.38  cents,  and  the  operat- 
ing expenses  and  taxes  about  2.45  cents.  The 
profit  of  apparently  $348,553.49  is  15  per  cent  of 
the  $2,326,454.06  above  quoted,  and  9.7  per  cent 
of  the  capitalization. 

The  Washington  street  railways,  like  those  of 
Massachusetts,  enjoy  no  franchise.  The  acts  cre- 
ating and  governing  the  roads  contain  the  startling 
provision  that  they  "  may  at  any  time  be  altered, 
amended,  or  repealed  by  the  Congress  of  the  United 
States." 


528  municipal  monopolies. 

Cincinnati. 

The  State  of  Ohio,  in  1896,  passed  the  so-called 
Rogers  Law,  permitting  cities  to  give  50-year  fran- 
chises. A  prominent  member  of  the  Ohio  Legis- 
lature learned  of  the  proposed  law  some  days  in 
advance  of  the  meeting  of  the  Legislature,  through 
a  conversation  of  Mark  Hanna  which  was  over- 
heard in  a  railroad  train ;  but  with  all  his  efforts, 
he  was  not  able  to  prevent  the  final  passage  of  the 
bill.  Before  the  people  of  the  State  secured  the 
repeal  of  the  law,  at  the  next  session  of  the  Legis- 
lature the  city  government  of  Cincinnati  was 
induced  to  grant  a  50-year  franchise  to  the  rail- 
ways of  that  city. 

Fares  on  most  of  the  Cincinnati  lines  are  five 
cents  ;  but  in  20  }rears,  and  every  15  years  after- 
wards, fares,  taxes,  transfers,  and  all  other  terms 
and  conditions,  are  declared  in  this  franchise  to  be 
subject  to  revision  by  the  city,  after  hearings, 

"provided,  however,  that  the  terms  so  to  be  fixed  shall  be 
equitable  according  to  the  then  cost  of  carrying  passengers, 
and  to  be  acceptable  to  and  agreed  upon  by  The  Cincinnati 
Street  Railway  Company,  its  successors  or  assigns,  or  if 
said  parties  should  not  be  able  to  agree  upon  said  terms 
and  conditions,  then  all  questions  with  respect  to  the  same 
shall  be  submitted  to  the  adjudication  of  a  court  of  compe- 
tent jurisdiction  in  a  suit  brought  by  the  said  The  Cincin- 
nati Street  Railway  Company,  its  successors  or  assigns,  to 
enjoin  the  municipal  corporation  from  enforcing  the  terms 
so  fixed." 


STREET  RAILWAYS.  529 

What  shall  guide  the  court  in  determining 
"equitable"  terms  "according  to  the  then  cost  of 
carrying  passengers,"  the  law  unfortunately  does 
not  determine. 

Chicago. 

Says  Mr.  Porter,  in  the  Massachusetts  Special 
Street  Railway  Report  (p.  207)  :  — 

"If  those  who  have  filled  our  library  shelves  with  disser- 
tations on  municipal  matters  had  expended  one-half  the 
energy  in  studying  from  a  broad  and  practical  standpoint 
the  development  of  the  up-to-date  street-railway  system  of 
Chicago,  with  a  total  mileage  actually  exceeding  that  of 
the  United  Kingdom,  which  they  have  devoted  to  the  '  com- 
mon-good-fund '  experiment  of  three  years  in  horse-cars 
and  77  miles  of  track  in  the  city  of  Glasgow,  they  might 
perhaps  have  discovered  some  useful  testimony." 

Although  the  writer  devoted  a  considerable  por- 
tion of  a  year  to  such  a  study  of  the  Chicago 
street  railways,  for  the  1896  Report  of  the  Illinois 
Bureau  of  Labor  Statistics,  it  was  scarcely  possi- 
ble to  find  a  single  lesson  in  the  relations  of  the 
city  to  the  railways  which  Chicago  could  teach  the 
rest  of  the  world,  save  that  20-year  franchises 
have  been  proven  long  enough  to  permit  of  all  the 
enormous  development  of  track  and  service  which 
Mr.  Porter  lauds.  But  more  corrupt  relations  be- 
tween the  city  and  State  governments  on  the  one 


530  MUNICIPAL   MONOPOLIES. 

hand,  and  public  franchises  on  the  other,  it  would 
be  difficult  to  find.  A  prominent  street-railway 
financier  tells  the  writer  that  he  offered  to  build 
extensive  lines  in  Chicago  about  five  years  ago, 
before  quite  all  the  streets  had  been  secured  by 
existing  companies.  He  offered  a  straight  3-cent 
fare,  and  a  considerable  bonus  to  the  city.  But 
members  of  the  City  Council  assured  him  that  such 
terms  were  not  important.  The  vital  condition 
was  that  he  must  pay  $50,000  to  the  aldermen  at 
the  start,  and  $250,000  when  he  secured  his 
franchise. 

President  Farson,  of  the  Calumet  Street  Rail- 
way of  South  Chicago,  publicly  stated  early  in 
1896,  when  a  franchise  with  little  compensation 
and  5-cent  fares  was  about  to  be  granted  to  the 
General  Electric  Railway,  from  the  heart  of  the 
city  south  to  26th  Street,  that  for  such  a  fran- 
chise for  20  years,  if  he  could  have  it  without  dis- 
honorable relations  with  the  City  Council,  he 
would  pay  $100,000  to  the  city,  and  give  a  straight 
3-cent  fare.  It  is  the  almost  unanimous  belief  in 
Chicago  that  the  existing  street-railway  companies 
have  promoted  this  terrible  condition  of  affairs  on 
which  they  have  fattened,  and  that  so  far  from  at- 
tempting to  secure  reform,  have  spent  enormous 
sums  of  money  in  securing  the  passage  by  the  Illi- 
nois Legislature  in  1897  of  the  so-called  Allen 
Law,  modeled  after  the  Rogers  Law  of  Ohio.    The 


STREET  RAILWAYS.  531 

great  fear  of  Chicago  is  that  a  corrupt  council  will 
fasten  fifty-year  franchises  upon  the  people  before 
the  new  law  can  be  repealed,  as  it  is  pretty  sure 
to  be  ere  long. 

The  Massachusetts  Special  Street  Railway  Com- 
mittee again  illustrated  its  bias  —  to  put  it  mildly 
—  by  the  following  statement  in  its  account  of 
Chicago  conditions :  — 

"  The  only  demand  for  a  lower  rate  of  fare  comes  from 
the  Socialists,  who  oppose  any  payment  being  made  to  the 
city,  and  advocate  the  reduction  of  gross  income  by  lower- 
ing fares  instead  of  by  means  of  such  payment.  The  ser- 
vice appears  in  general  to  be  satisfactory,  excepting  some 
complaint  that  not  sufficient  cars  are  run,  this  being  a 
natural  consequence  of  a  tax  on  cars." 

To  those  familiar  with  the  demand  for  transfers 
between  the  north,  west,  and  south  sides  of  the 
city,  and  with  the  growing  demand  in  many  quar- 
ters that  the  Detroit  and  Toronto  rates  of  fare 
or  even  less  should  prevail,  this  statement  in  the 
Massachusetts  Report  seems  a  little  singular. 

The  respect  for  law  on  the  part  of  some  railway 
corporations  in  the  Windy  City  is  well  illustrated 
in  the  following  affidavit  of  a  Chicago  bridge 
foreman  and  inspector  of  bridges,  quoted  from 
the  Bench  by  Justice  Waterman  of  the  Appellate 

g 


Court  of  Illinois  in  rendering  a  decision.1 


1  Chicago  General  Railway  Company  et  al.  vs.  The  Chicago 
City  Railway  Company,  October  Term,  18'J5,  p.  5'Jl, 


532  MUNICIPAL    MONOPOLIES. 

The  affiant  states  :  — 

"  That  about  10  o'clock  on  the  morning  of  April  4, 1895, 
he  was  working  in  the  neighborhood  of  said  22d  Street 
bridge,  and  was  attracted  thereto  by  a  great  noise  and  riot 
in  the  streets ;  that  he  immediately  hastened  to  the  east 
end  of  the  bridge,  and  there  saw  a  car  of  the  General  Rail- 
way Company  lying  upon  its  side,  with  ropes  and  grappling- 
hooks  attached  thereto,  which  were  also  attached  to  a 
wrecking  wagon  of  the  City  Railway  Company  ;  and  affiant 
saw  an  immense  crowd  of  men  surrounding  said  car,  armed 
with  sledge  hammers,  axes,  crowbars,  pickaxes,  and  other 
instruments  of  destruction,  and  engaged  in  smashing  up 
and  completely  destroying  the  car,  which  they  continued 
until  it  was  completely  destroyed;  that  they  were  under 
the  command  of  a  large  man,  and  acting  under  his  orders  in 
the  work  of  destroying  the  car,  and  worked  with  great  en- 
ergy and  rapidity,  so  that  the  entire  destruction  of  the  car 
was  accomplished  in  less  than  ten  minutes  after  the  affiant 
reached  the  spot. 

"  Affiant  saw  L.  E.  McGann,  president  of  the  General 
Company,  standing  by  and  surrounded  by  a  large  number 
of  citizens,  who  expressed  great  indignation  at  the  acts  of 
violence  and  destruction,  and  offered  to  interfere  in  behalf 
of  the  General  Company,  and  drive  the  force  of  men  who 
were  destroying  its  car  away,  and  throw  them  into  the  river, 
and  teach  them  not  to  take  the  law  into  their  own  hands ; 
but  said  McGann  most  strenuously  exercised  himself  to  re- 
press the  citizens  who  witnessed  the  said  acts  of  destruction 
from  interfering  to  stop  the  same ;  he  used  the  most  stren- 
uous efforts  to  keep  the  peace,  and  but  for  his  efforts  to 
keep  the  peace,  the  destructive  acts  of  the  men  who  were 
destroying  the  car  must  have  resulted  in  bloodshed." 

Appellee  alleges  in  his  answer,  says  Justice  Waterman, 


STREET  RAILWAYS.  533 

"  that  it  has  the  lawful  right  to  keep  possession  of  the 
tracks  and  prevent  the  use  thereof  by  complainants,  by  the 
use  of  such  force  as  may  be  necessary  to  accomplish  that 
end." 

Deteoit. 

The  two  chief  lessons  from  this  city  are  the  im- 
possibility of  settling  the  street-railway  question 
by  competition,  and  the  possibility  of  low  fares. 
Although  the  Detroit  Electric  Railway  was  given 
a  franchise  in  December,  1894,  and  gave  promises 
and  pledges  to  sell  8  tickets  for  25  cents  between 
5.45  a.m.  and  8  p.m.,  or  6  tickets  for  25  cents  at 
other  hours,  with  rights  of  transfer,  the  company 
is  now  practically  consolidated  with  the  older  line, 
known  as  the  Detroit  Citizens'  Railway.  The  two 
roads  have  different  letter-heads,  but  the  same 
officers,  the  same  power-house,  and  the  same  color 
of  cars,  —  one  car  being  distinguished  from  another 
by  the  description  of  the  route  taken,  as  given  on 
the  outside  of  the  car.  Since  this  virtual  consoli- 
dation, the  low  fares  are  still  maintained  on  the 
newer  road,  as  the  ordinance  requires. 

There  was  so  much  complaint  of  a  reduction  in 
the  frequency  of  the  serviee  on  this  line,  in  order, 
as  it  was  believed,  to  force  people  to  pay  the  higher 
fares  of  the  other  company,  that  a  city  ordinance 
was  passed,  Feb.  2,  1897,  specifying  how  often  the 
cars  must  run,  and  what  routes  they  must  take. 


534  MUNICIPAL  MONOPOLIES. 

The  receipts  of  the  new  road,  however,  because 
of  its  location  on  the  newer  and  more  sparsely 
settled  streets,  or  because  of  the  desire  of  the 
new  management,  fell  from  $423,066  in  1896  to 
$394,213  in  1897. 

This  Detroit  Electric  Railway,  when  under  its 
original  management,  from  July  1,  1895,  to  June 
30,  1896,  operated  101  cars  on  its  56.2  miles  of 
track,  and  carried  about  10,659,000  passengers,  or 
189,608  per  mile.  This  is  about  the  average  of 
the  Lynn  and  Boston,  or  the  Springfield  (Mass.) 
road.  But  in  order  to  secure  this  traffic,  the  De- 
troit road  was  obliged  to  have  a  car  mileage  of 
58,704  per  mile  of  track,  or  30  per  cent  more  than 
on  these  two  Massachusetts  roads.  The  gross  re- 
ceipts were  only  $6,439  per  mile  of  track,  or  only 
11  cents  per  car-mile,  or  3.4  cents  per  passenger. 
The  operating  expenses  were  $4,188  per  mile  of 
track,  7.15  cents  per  car-mile,  and  2.2  cents  per 
passenger.  The  taxes  were  so  low  as  to  leave  for 
profit  and  depreciation  about  $2,100  per  mile  of 
track,  or  about  5  per  cent  on  the  cost  of  the  road. 
This  was  not  enough.  If  the  traffic  had  been  two 
or  three  times  as  great  per  mile,  as  in  our  larger 
cities,  an  average  fare  of  3.4  cents  would  probably 
have  furnished  a  good  profit,  a  safe  margin  for 
depreciation,  and  have  left  for  the  city  such  fran- 
chise taxes  and  paving  expenses  as  are  usually  paid 
by  American  street  railways.     It  is  claimed  that 


STREET  RAILWAYS.  535 

this  company  did  not  pay  the  usual  taxes  and 
street-paving  expenses.  As  to  taxes,  it  escaped 
the  2  per  cent  tax  on  gross  earnings  paid  by  the 
other  company,  but  not  the  regular  property  tax. 
As  to  street-paving,  the  company  removes  the  snow 
and  ice,  and  restores  the  paving  which  it  disturbs 
for  its  track ;  but  the  city  ordinarily  keeps  the 
pavement  in  repair,  and  not  only  does  all  the  new 
paving  of  streets  where  such  is  required,  but  laid 
six  inches  of  concrete  foundation  for  the  ties  of 
the  new  company. 

More  with  reference,  probably,  to  the  future 
growth  of  the  city  than  to  immediate  earnings, 
this  Detroit  railway,  on  Oct.  1,  1895,  offered  to 
sell  single  tickets  for  3  cents  and  30  tickets  for 
$1,  and  pay  to  the  city  3^  per  cent  interest  on  the 
purchase  price  of  the  better-located  tracks  of  the 
"  Citizens'  Railway,"  and  3£  per  cent  of  the  net  cost 
of  their  renewal  where  needed,  if  the  city  would 
buy  these  tracks  at  the  expiration  of  the  franchise 
of  the  old  company,  and  lease  them  to  the  new 
company ;  but  the  city  was  not  in  condition  to 
accept  the  offer. 

The  Detroit  Citizens'  Railway,  with  its  101 
miles  of  heavy  rails,  its  575  cars,  and  its  excellent 
service,  has  for  over  a  year  been  furnishing  ad- 
vantages to  the  city  which  the  present  mayor,  Mr. 
William  C.  May  bury,  considers  equal  to  those 
furnished   by  the   other  company.      They  are  at 


536  MUNICIPAL   MONOPOLIES. 

least  better  than  are  furnished  anywhere  else  in 
the  United  States.  This  old  line  sells  six  tick- 
ets for  25  cents,  day  and  night,  with  universal 
transfers,  and  eight  tickets  for  25  cents  between 
5.30  and  7  a.m.,  and  between  5  and  6  p.m. 

The  company  has  the  great  advantage  of  having 
issued  only  83,890,000  of  securities,  or  838,614 
per  mile.  It  has  another  advantage  in  the  great 
speed  its  cars  are  enabled  to  make  in  the  broad, 
level  streets  of  the  city,  120  miles  being  a  common 
day's  work  for  a  car.  The  company  is  under  the 
disadvantage  usually  to  be  found  in  a  level  city 
no  larger  than  Detroit  (about  250,000),  and  with 
such  excellent  paved  streets,  viz.,  the  extensive 
use  of  the  bicycle.  This  company  also  does  the 
usual  amount  of  paving. 

Under  all  these  circumstances,  the  company  has 
reduced  the  percentage  of  its  operating  expenses 
to  its  receipts  from  84.8  in  1894  to  51.3  per  cent 
in  1897,  and  in  that  year  had  gross  receipts  of 
810,913  per  mile,  and  net  earnings  from  operation 
of  85,597  per  mile.  The  average  taxes  per  mile 
must  have  been  less  than  8400. *  The  net  earn- 
ings, therefore,  must  have  been  85,200  per  mile, 
or  13.5  per  cent  on  the  outstanding  securities. 


1  According  to  the  Massachusetts  Special  Street  Railway  Re- 
port, all  the  street  railways  of  Detroit  paid,  on  July  1,  189G-1897, 
$44,000  as  taxes.  If  all  of  it  were  concentrated  on  this  road,  it 
would  he  only  $430  per  mile. 


STREET  HAIL  WAYS.  537 

If  even  5  per  cent  were  written  off  for  depreci- 
ation, the  remaining  8  per  cent  would  pay  the 
5  per  cent  interest  on  the  12,640,000  of  bonds, 
and  leave  about  14  per  cent  on  the  81,250,000  of 
stock.  These  final  deductions  are  based  on  the 
report,  claimed  to  be  official,  in  American  Street 
Railway  Investments  for  1898.  They  indicate 
that  a  company  under  such  conditions  as  exist  in 
Detroit,  which  are  neither  the  best  nor  the  worst 
among  our  large  American  cities,  can  make  a  good 
profit  by  selling  6  tickets  for  25  cents  all  the 
time,  and  8  for  25  cents  at  certain  hours  of  the 
day  most  important  for  workingmen.  The  aver- 
age fare  on  the  Detroit  City  Railway  is  not  far 
from  4i  cents,  no  allowance  being  made  for  trans- 
fers, which  would  still  further  reduce  it. 

Montreal. 

The  only  company  in  Montreal  (population 
about  250,000)  is  the  Montreal  Street  Railway 
Company,  chartered  in  1861,  and  with  its  franchise 
in  1892  extended  for  30  years.  As  in  Detroit,  the 
fares  are  low ;  for  while  single  tickets  are  5  cents, 
and  between  midnight  and  6  A.  m.  the  company 
can  charge  10  cents,  it  must,  during  the  rest  of 
the  day,  sell  6  tickets  for  25  cents  and  25  for 
$1,  and  provide  tickets  for  school  children  at  the 
rate  of  10  tickets  for  25  cents,  and  workingmen's 


538  MUNICIPAL  MONOPOLIES. 

tickets,  available  between  6  and  8  a.m.  and  5  and 
7  in  the  evening,  eight  tickets  for  25  cents. 
These  hours  for  the  cheap  tickets  are  longer  than 
in  the  case  of  the  Detroit  Citizens'  Railway.  The 
latter  does  not  give  a  special  rate  for  school  chil- 
dren's tickets.  Quite  significantly  the  Massachu- 
setts Report  omits  all  reference  to  these  low  fares. 

The  company  gives  free  transfers,  pays  the  city 
the  cost  of  paving  between  the  rails,  and  $1,650 
per  mile  of  street,  or  a  sum  of  a  little  over  $ 52,000 
a  year,  for  clearing  off  snow.  This  road,  of  over 
84.5  miles  of  track  and  5.3  cars  per  mile,  did  a 
business,  Sept.  30,  1896-1897,  of  $1,342,368,  or 
$15,886  per  mile.  Assuming  that  the  average  re- 
ceipts from  fares  are  about  4.26  cents  per  passenger, 
as  in  Toronto,  which  has  similar  rates  of  fare,  this 
would  mean  372,910  passengers  per  mile  of  track. 
The  company,  after  paying  a  franchise  tax  of  about 
$60,000  in  addition  to  the  usual  city  tax  on  real 
property,  and  after  paying  4|  per  cent  and  5  per 
cent  interest  on  its  $1,000,000  of  bonds,  paid  9  per 
cent  dividends  on  $4,400,000  of  stock  in  1896- 
1897,  and  placed  in  the  surplus  fund  3.2  per  cent 
more. 

The  operating  expenses  and  ordinary  taxes,  ex- 
clusive of  the  franchise  tax,  have  gradually  fallen 
from  82.68  per  cent  of  the  gross  receipts  in  1891- 
1892  under  horse  traction,  to  54.87  per  cent  in 
1896-1897  under  electric  traction.     The  franchise 


STUEET   RAILWAYS.  539 

tax  is  4  per  cent  of  the  gross  earnings  up  to 
'$1,000,000 ;  6  per  cent  of  the  gross  earnings 
between  $1,000,000  and  $1,500,000  ;  8  per  cent 
on  the  next  half  million  of  gross  earnings ;  10  per 
cent  on  the  next  half  million ;  12  per  cent  on  the 
next  half  million,  i.e.,  from  $2,500,000  to  $3,000,- 
000 ;  and  15  per  cent  on  all  gross  earnings  above 
$3,000,000.  If  the  company  had  been  content 
with  7  per  cent  dividends,  but  with  the  same  ad- 
dition to  surplus  which  was  probably  virtually  a 
depreciation  fund,  fares  could  have  been  reduced 
to  4  cents.  If,  in  addition  to  that,  the  city  had 
exacted  no  franchise  tax,  fares  could  have  been 
3.8  cents.  In  virtue  of  the  increase  of  traffic 
which  would  have  followed  such  a  reduction  of 
fares,  it  might  have  been  possible  to  maintain  7  per 
cent  dividends  with  3.5  cent  fare. 


Tobonto. 

The  experience  of  this  city  of  about  200,000 
inhabitants,  with  low  "fares  and  high  franchise 
taxes,  is  too  familiar  to  require  lengthy  treatment, 
but  the  leading  facts  may  be  here  briefly  reviewed. 

In  1891  the  franchise  of  the  single  street  rail- 
way expired ;  and  the  city  operated  the  line  for  a 
few  months,  having  paid  the  appraised  value  of 
the  physical  plant,  $24,640  a  mile.  Although 
city  operation  was  very  successful,  and  more  prof- 


540  MUNICIPAL   MONOPOLIES. 

itable  than  the  lease  since  made,  the  City  Council 
of  24  members  decided,  by  a  majority  of  one,  to 
grant  a  franchise  for  20  years,  with  the  privilege 
of  renewal  for  10  years  more  on  condition  that  the 
successful  bidder  should  sell  8  tickets  for  25  cents 
for  use  before  8  A.M.  and  between  5  and  6  P.M., 
and  10  tickets  for  25  cents  for  use  of  school  chil- 
dren between  8  a.m.  and  5  p.m.  during  the  five 
school  days  of  the  week ;  6  tickets  for  25  cents 
and  25  for  $1,  good  at  other  times  except  late  at 
night,  when  the  company  is  at  liberty  to  charge  10 
cents.  Single  tickets  were  to  be  5  cents,  and 
free  transfers  were  to  be  given.  Cars  were  not 
to  be  crowded,  the  city  engineer  being  the  judge. 
No  Sunday  cars  were  to  be  run  until  agreed  upon 
by  a  vote  of  the  citizens.  Since  May,  1897,  Sun- 
day cars  are  run,  with  7  tickets  for  25  cents  all 
day.  No  employee  was  to  work  more  than  10 
hours  a  day,  or  60  hours  a  week,  or  more  than  six 
days  per  week,  or  for  less  than  15  cents  per  hour. 
In  return  for  city  construction  and  maintenance 
of  all  paving,  the  company  was  to  pay  the  city 
annually  $800  per  mile  of  single  track,  and  was  to 
remove  snow  and  ice.  The  whole  system  was  to 
be  transformed  from  horse-car  to  electricity,  and 
the  tracks  were  to  be  extended  from  time  to  time, 
as  recommended  by  the  city  engineer  and  approved 
by  two-thirds  vote  of  the  City  Council,  subject  to 
the  right  of  the  city  to  grant  a  franchise  to  another 


STREET  RAILWAYS.  541 

company  on  streets  which  the  original  company 
should  refuse  to  occupy. 

Finally,  the  company  was  to  pay  the  city  for 
the  physical  plant  what  the  city  had  just  paid  for 
it ;  and  at  the  end  of  the  contract  the  city  was  to 
have  the  right  to  "  take  over  all  the  real  and  per- 
sonal property  necessary  to  be  used  in  connection 
with  the  working  of  the  said  railways,  at  a  value 
to  be  determined  by  one  or  more  arbitrators.  .  .  . 
But  the  city  shall  only  pay  for  the  land  conveyed 
by  them  [the  railways]  to  the  purchaser  [the  city] 
what  it  is  worth,  without  reference  to  its  value  for 
the  purpose  of  operating  a  street  railway  or  rail- 
ways." 

Subject  to  these  conditions,  bids  were  solicited. 
"  Capitalists  from  New  York,  who  came  to  investi- 
gate the  offer,  laughed  at  the  thought  that  they 
should  pay  any  of  the  earnings  to  the  city.  They 
had  been  accustomed,  so  they  informed  one  of  the 
committee,  to  pay  something  to  the  aldermen,  but 
nothing  to  the  municipality."1  Three  bidders, 
however,  finally  appeared,  and  the  successful  com- 
pany agreed  to  pay  8  per  cent  on  all  gross  re- 
ceipts up  to  $1,000,000  per  annum;  10  per  cent 
on  receipts  between  $1,000,000  and  $1,500,000  ; 
12  per  cent  between  $1,500,000  and  $2,000,000  ; 
15  per  cent  between  $2,000,000  and  $3,000,000 ; 

1  The  New  York  Outlook  of  Feb.  5,  1898,  article  by  W.  D. 
Gregory. 


542  MUNICIPAL   MONOPOLIES. 

and  20  per  cent  on  all  gross  receipts  over  $3,000,- 
000.  This  would  mean  an  average  of  from  17  per 
cent  to  18  per  cent  of  the  total  gross  receipts  of 
the  Boston,  New  York,  and  Philadelphia  com- 
panies, and  from  10  to  14  per  cent  in  Chicago, 
Brooklyn,  Jersey  City,  Pittsburg,  Minneapolis, 
and  St.  Paul,  and  would  mean  as  much  in  several 
other  cities  if  the  lines  were  united. 

Since  1891  the  successful  bidder  has  extended 
the  system  from  about  68  miles  to  90.93  miles, 
and  by  substituting  electricity  for  horse-power 
has  reduced  operating  expenses  and  the  ordinary 
taxes  from  71.9  per  cent  of  the  gross  receipts  in 
1892  to  48.8  per  cent  in  1897.  As  the  average 
amount  paid  per  passenger  in  the  latter  year  was 
4.26  cents,  the  cost  per  passenger,  aside  from  the 
franchise  tax,  was  2.08  cents.  The  number  of 
passengers  carried  per  mile  was  277,921,  and  for 
each  mile  of  track  the  company  had  2.8  electric 
motor  cars  and  two  trailers.  After  paying  interest 
on  $32,992  of  bonds  per  mile,  or  enough,  probably, 
to  duplicate  the  road,  the  company,  in  1897,  paid 
in  dividends  about  3.3  per  cent  on  stock  issues  of 
$65,984  per  mile,  and  laid  aside  a  surplus  of  about 
1.2  per  cent.  If  the  stock  issues  had  been  limited 
even  to  $17,000  a  mile,  bringing  up  the  total 
capitalization  to  $50,000,  the  dividends  and  sur- 
plus on  this  stock  would  have  been  11  per  cent. 
The  franchise  tax  of  about  $87,761   was  equiva- 


STREET  RAILWAYS.  543 

lent  to  $0.0035  per  passenger.  If,  therefore,  any- 
such  tax  had  not  been  required,  the  average  fare 
might  have  been  3.9  cents  and  still  have  left  as 
large  a  profit,  even  if  there  had  not  been  airy  in- 
crease of  traffic  with  the  reduced  fare.  In  expla- 
nation both  of  the  large  over-capitalization  and  of 
why  the  city  consented  to  forego  direct  city  opera- 
tion after  its  great  success  in  the  same  during  a 
portion  of  1891,  one  of  the  counsel  of  the  road 
informed  Dr.  Charles  B.  Spahr,  of  The  Outlook, 
that  two  of  the  original  four  who  received  the 
franchise  had  sold  out  after  doubling  their  money, 
and  the  owners  of  the  franchise  were  entitled  to 
compensation  for  the  vast  amount  of  credit  they 
had  to  command  in  order  to  take  the  franchise, 
and  also  for  their  "labor  in  agitating  against 
municipal  ownership  "  ! 

The  gross  earnings  of  the  company  per  car-mile 
in  August,  1896,  were  15.71  cents,  and  the  oper- 
ating expenses  7.61  cents. 

In  fairness  it  should  be  added,  (1)  That  the 
company  had  to  pay,  in  1891,  for  the  68  miles  of 
horse-car  lines,  $1,453,788,  or  $21,377  per  mile. 
Reckoned  on  the  present  91  miles,  it  would  be 
$15,975  per  mile.  Most  of  this,  however,  should 
have  been  written  off  ere  this  as  depreciation. 
(2)  Some  American  companies  in  cities  of  the 
same  size  as  Toronto  might  be  slightly  handicapped 
by  the  necessity  of  more  mileage  for  so  large  a  city 


544  MUNICIPAL   MONOPOLIES. 

even  with  the  same  traffic,  and  by  the  fact  that 
wages  are  probably  higher  in  the  United  States 
than  in  Toronto. 

Massachusetts. 

This  State  has  been  so  much  more  progressive 
than  any  other  in  this  country  in  the  attempt  to 
regulate  without  owning  public  utilities  such  as 
electric  light,  gas,  street  and  steam  railways,  that 
much  can  be  learned  from  a  close  study  of  its 
experience. 

In  1853  the  first  street  railway  in  the  State  was 
chartered,  —  the  Metropolitan  of  Boston,  and  a 
Cambridge  Company.  In  1860  there  were  88.87 
miles  of  horse  railway  in  the  State ;  in  1870, 
139.44  miles;  in  1880,  222.54  miles;  in  1890, 
612.38  miles;  and  in  1897,  1,516.64  miles.  No 
cable  or  steam  dummy  lines  have  ever  existed  in 
the  State.  In  July,  1888,  the  first  electric  cars 
were  used  on  the  Lynn  and  Boston  railway,  and  in 
February,  1889,  on  the  West  End  system,  then 
just  organized  in  Boston,  although  the  first  road 
to  be  fully  equipped  with  electricity  was  the 
Boston  and  Revere,  in  August,  1889. 

In  September,  1897,  there  were  only  11.95  miles 
of  horse-car  line  left  in  the  State.  Prior  to  1864 
charters  were  granted  with  50-year  limits,  and  with 
the  right  of  city  purchase  at  the  end  of  the  time. 


STREET    I!  AIL  WAYS.  545 

These  features  were  omitted  in  the  codification  of 
the  law  of  1871.  Although  this  code  was  sup- 
posed to  provide  a  general  law  for  the  chartering 
of  the  railroads,  special  charters  have  still  been 
sought  and  secured.  In  most  cases,  however, 
these  charters  have  not  exempted  the  companies 
from  the  general  provisions  now  to  be  considered. 
A  railroad  commission  was  created  with  salaries, 
which  are  paid  as  in  the  case  of  the  gas  and  elec- 
tric light  commission,  by  the  company  supervised  ; 
and  this  is  considered  by  a  former  member  of  one 
of  these  commissions  to  be  unwise,  since  it  uncon- 
sciously -tends  to  make  these  boards  feel  beholden 
to  the  companies  from  which  they  derive  their 
income. 

The  steam  railroad  and  street  railway  commis- 
sion, which  is  one  body,  must  directly,  or  through 
an  accountant,  examine  and  supervise  the  books 
and  accounts  of  all  railroad  and  railway  corpora- 
tions, "  to  see  that  they  are  kept  in  a  uniform 
manner  upon  the  system  prescribed  by  the  Board." 
On  complaint  of  20  legal  voters  of  a  place,  or  of 
the  mayor  and  aldermen  or  town  selectmen,  the 
board  may  investigate  the  reasonableness  of  fares, 
and  order  reductions,  but  not  below  "the  aver- 
age rates  of  fare  charged  for  similar  service  by 
other  street-railway  companies,  which  in  the  judg- 
ment of  the  board  of  railroad  commissioners  are 
operated  under  substantially  similar  conditions." 


546  MUNICIPAL   MONOPOLIES. 

This  limitation  will  doubtless  prevent  any  reduc- 
tions below  five  cents,  as  the  railroad  lobby  must 
have  realized.  Prior  to  1897  the  law  prevented 
any  reduction  of  fares  that  would  lower  the  net 
profits  below  10  per  cent  upon  the  cost  of  con- 
struction, which  was  often  the  high  cost  of  previous 
years. 

In  all  the  reports  of  the  Board,  there  are  only 
two  or  three  cases  of  any  recommendation  by  the 
Board  for  the  reduction  of  fares,  and  in  no  case 
did  this  recommendation  call  for  a  lower  fare  than 
5  cents. 

Since  1871  no  certificate  of  stock  in  any  street- 
railway  company  could  be  issued  until  the  par 
value  was  actually  paid  in  cash.  No  stock  could 
be  issued  in  payment  for  property,  but  only  for 
cash.  No  increase  of  stock  beyond  the  amount 
fixed  and  limited  by  its  articles  of  association  or 
by  an  Act  of  the  Legislature  could  be  made  without 
the  approval  of  the  Board.  As  slightly  amended 
in  1887,  this  increase  is  carefully  limited  to  exten- 
sions of  road  or  to 

"  other  necessary  and  lawful  purposes  set  forth  in  the  pe- 
tition ;  and  the  Board,  after  an  examination  of  the  assets 
and  liabilities  of  the  company,  and  a  hearing  on  the  peti- 
tion, if  it  appears  that  the  proposed  purpose  is  lawful  and 
consistent  with  the  public  interest,  and  that  increase  of 
capital  is  necessary  in  order  to  enable  the  company  to  carry 
out  the  same  in  good  faith,  may  by  an  order  in  writing 


8  TREET  11 A IL  WA  Y S.  5  1 7 

allow  such  necessary  increase,  specifying  the  amount  thereof, 
and  the  purpose  for  which  the  same  is  allowed ;  but  no 
increase  shall  be  allowed  beyond  the  value  of  the  property 
of  the  company,  including  the  cash  to  be  paid  in  on  such 
increase.  A  certificate,  showing  the  amount  and  purposes  of 
the  increase  so  allowed,  shall  forthwith  be  filed  in  the  office 
of  the  secretary  of  the  Commonwealth." 

In  1896  the  provision  that  no  increase  of  stock 
could  be  made  in  excess  of  the  structural  value  of 
the  plant  and  of  the  cash  assets  was  repealed,  and 
instead  it  was  provided,  "  If  it  appears  that  the 
assets  or  capital  stock  of  a  company  are  impaired, 
the  Board  may  prescribe  such  conditions  and  re- 
quirements as  it  may  deem  proper,"  and  make  a 
full  statement  of  the  case  in  its  annual  report. 

The  two  subsequent  reports  of  the  Board  refer 
to  only  two  cases  where  actual  impairment  of  the 
stock  has  been  brought  to  the  notice  of  the  Board 
through  an  application  to  issue  more  securities. 
In  one  case,  that  of  the  Lowell  and  Suburban, 
where  the  58  miles  of  road,  with  about  two  cars 
and  four  motors  per  mile,  had  an  outstanding  net 
capitalization  of  $36,607.15  per  mile,  the  Board 
found  that  about  $4,018.93  of  its  $13,797.38  of 
stock  per  mile  represented  no  existing  structural 
value.  The  Board,  however,  permitted  a  consid- 
erable increase  of  capitalization  for  improvements, 
and  merely  ordered  that  the  dividends  should  not 
exceed  6  per  cent  until  the  impairment  was  re- 


548  MUNICIPAL  MONOPOLIES. 

placed.  Even  this  limit  was  raised  to  7  per  cent 
in  1897.  The  other  case,  that  of  the  West  End, 
will  be  referred  to  later. 

In  May,  1889,  the  Legislature  introduced  re- 
strictions upon  the  issue  of  mortgage  bonds  by 
limiting  the  purpose  of  their  issue  to  construction 
and  equipment,  the  purchase  of  necessary  real  or 
personal  estate,  the  refunding  of  its  funded  debt, 
and  extensions, 

"  provided  that  the  Board  of  Railroad  Commissioners,  after 
an  examination  of  the  assets  and  liabilities  of  the  company, 
and  such  further  investigations  as  it  deems  requisite,  shall 
by  vote  approve  of  such  issue  as  being  consistent  with  the 
public  interests.  The  vote  of  approval  shall  specify  the 
amount  of  the  issue,  the  rate  of  interest,  which  in  any  case 
shall  not  exceed  six  per  centum  per  annum,  and  the  purpose 
to  which  the  proceeds  shall  be  applied ;  and  no  such  issue 
shall  be  authorized  unless,  in  the  opinion  of  such  Board, 
the  value  of  the  constructed  tracks,  the  equipments,  and 
the  other  real  and  personal  property  of  the  company,  taken 
at  a  fair  value  for  railroad  purposes,  and  excluding  the  value 
of  the  franchise,  equals  or  exceeds  the  amount  of  the  capi- 
tal stock  outstanding  and  the  debt.  A  certificate,  setting 
forth  the  vote  of  approval,  shall  be  filed  in  the  office  of 
the  secretary  of  the  Commonwealth  before  such  bonds  are 
issued." 

Clever  attorneys  found  means  of  evading  the 
purpose  of  the  law  by  issuing  coupon  notes  and 
other  evidence  of  indebtedness  not  secured  by  a 
mortgage.     Therefore,  in  1897,  a  law  was  passed 


STREET  RAILWAYS.  549 

forbidding  the  issue  of  such  paper  payable  more 
than  twelve  months  from  the  date  thereof,  and 
further  forbidding  the  issue  of  such  long-time 
notes  "  to  an  amount  which,  including  the  amount 
of  all  such  securities  previously  issued  and  out- 
standing, exceeds  on  the  whole  the  amount  of  its 
capital  stock  at  the  time  actually  paid  in." 

Until  1893  issues  of  stock  could  be  taken  at  par 
by  stockholders,  no  matter  how  much  of  a  pre- 
mium they  might  command.  The  law  forbidding 
this,  as  amended  in  1894,  requires  stockholders  to 
pay  the  market  value  of  all  the  new  issues  of 
stock  which  are  not  sold  in  the  open  market.  The 
Board  fixes  this  market  value,  "  taking  into  ac- 
count previous  sales  of  stock  of  the  corporations 
and  other  pertinent  conditions." 

The  Gas  and  Electric  Light  Commissioners  were 
at  the  same  time  empowered  to  act  in  the  same 
manner  in  the  case  of  gas  and  electric  light  com- 
panies, and  the  "  commissioner  of  corporations  in 
the  case  of  an  aqueduct  or  water  company,  or  a  cor- 
poration established  for  and  engaged  in  the  busi- 
ness of  transmitting  intelligence  by  electricity." 

Since  June,  1894,  an  existing  abuse  was  stopped 
by  the  following  law :  — 

"  If  a  foreign  corporation  which  owns  or  controls  a  major- 
ity of  the  capital  stock  of  a  domestic  street  railway,  gas,  or 
electric  light  corporation,  shall  hereafter  issue  stock,  bonds, 
or  other  evidences  of  indebtedness  based  upon  or  secured 


550  MUNICIPAL   MONOPOLIES. 

by  the  property,  franchise,  or  stock  of  such  domestic  corpo- 
ration; unless  such  issue  is  authorized  by  the  law  of  this 
Commonwealth,  the  supreme  judicial  court  sitting  in  equity 
may,  in  its  discretion,  dissolve  such  corporation." 

In  May,  1894,  all  stock  or  script  dividends  were 
forbidden  in  the  case  of  telegraphs,  telephones, 
gas  and  electric  light,  steam  and  street  railways, 
aqueduct  and  water  companies ;  and  it  was  pro- 
vided that  no  lease,  purchase,  or  consolidation 
of  street  railways  should  be  valid  until  approved 
by  the  Board.  In  1897  it  was  further  ordered 
that  the  capitalization  should  not  be  increased  as 
a  result  of  consolidation.  The  Board  has  had 
control  since  1896  of  the  location  of  interurban 
roads  on  State  highways,  and  could  alone  author- 
ize extensions  beyond  the  limits  of  its  charter 
into  neighboring  towns  and  cities.  The  Board 
may  order  additional  accommodations  for  passen- 
gers, prescribe  the  fenders  that  must  be  upon 
all  cars,  and  make  rules  for  the  heating  of  cars. 
A  day's  work  for  all  conductors,  drivers,  and 
motormen  cannot  exceed  10  hours  in  12  except  in 
cases  of  special  emergency. 

Before  considering  the  tenure  of  Massachusetts 
companies  and  the  great  change  therein  effected 
in  1897,  it  is  well  to  consider  the  effect  of  the 
admirable  laws  just  described.  Unfortunately 
they  were  not  all  passed  before  the  introduction 
of  electricity.      Through  various  loopholes  in  the 


STREET  RAILWAYS.  551 

earlier  laws,  such  as  the  issue  of  coupon  notes,  the 
issue  of  valuable  stock  at  par  to  stockholders,  and 
a  large  increase  of  securities  on  the  consolidation 
of  companies,  stock-watering  was  by  no  means 
unknown  even  in  Massachusetts.  Indeed,  where 
the  general  railway  law  threw  great  restrictions 
around  such  increase  of  securities,  the  Legislature 
was  sometimes  induced  to  grant  special  exemp- 
tions. For  example,  the  report  of  the  Massachu- 
setts Railroad  Commission  of  January,  1894,  states 
that  between  Sept.  30,  1892,  and  Sept.  30,  1893, 
seven  companies  were  thus  consolidated  into  two, 
the  Lynn  and  Boston,  and  the  Lowell,  Lawrence, 
and  Haverhill,  with  an  increase  of  capitalization 
from  $3,857,140  to  $8,580,077  —  an  increase  of 
14,722,937,  or  about  125  per  cent.  In  other 
words,  the  increase  per  mile  was  from  $27,011  to 
$53,649.  The  only  apparent  result  to  show  for 
this  was  the  transformation  of  46.6  miles  of  the 
143  miles  of  road,  or  less  than  one- third,  from  horse 
to  electric  traction. 

The  Board  more  than  once  in  its  reports  refers 
to  the  amount  of  water  infused  into  the  capitaliza- 
tion of  consolidated  companies.1  The  Board  has 
declared  that  a  part  of  the  increase  of  $12,477  of 
capitalization  per  mile  in  all  the  Massachusetts 
companies  in  1892  and  1893  was  "stock-watering 
pure  and  simple;"  and  the  Board  has  also  held 

1  Report  for  18<J4,  p.  105,  and  for  1895,  p.  99. 


552  MUNICIPAL  MONOPOLIES. 

that  many  companies  were  not  charging  off  for 
depreciation  as  much  as  the  great  decline  in  the 
value  of  electrical  .appliances  demanded ;  yet 
there  do  not  seem  to  be  more  than  one  or  two 
cases  where  the  Board  has  taken  any  action  on 
account  of  it,  either  in  refusing  to  permit  increase 
of  stock  and  bonds,  or  in  requiring  reduction  of 
dividends. 

One  company,  with  more  than  half  the  income 
of  all  the  93  railways  of  the  State,  although  pos- 
sessing only  a  little  over  one-sixth  of  the  mileage, 
—  the  West  End  Company  of  Boston,  —  has  been 
particularly  aided  by  special  laws.  The  Metropol- 
itan Railway  of  Boston,  in  September,  1887,  had 
90  miles  of  horse  railway  in  the  heart  of  Boston, 
and  carried  472,850  passengers  per  mile,  with  a 
capital  investment  per  mile  of  only  $ 38,903.  From 
its  situation  and  the  density  of  its  traffic  it  had 
doubtless  cost  as  much  per  mile  as  any  other  of 
the  large  roads  of  the  city.  When  it  was  consol- 
idated with  the  others,  however,  to  form  the  West 
End  system,  the  capitalization  of  the  latter  in  1889 
became  $62,954  per  mile,  for  its  217  miles  of  road. 
Yet  the  average  density  of  its  traffic  (480,000  per 
mile)  was  scarcely  greater  than  that  of  the  Metro- 
politan, and  only  12.9  per  cent  of  its  track  had 
become  electric.  There  was  thus  an  increase  of 
50  per  cent  per  mile  in  capitalization  over  that 
of  its  most  important  constituent. 


STREET  RAILWAYS.  553 

In  1887  the  West  End  Company  was  exempted 
from  what  continued  for  10  years  to  be  the  danger 
confronting  all  the  other  companies  of  the  State 
in  case  they  greatly  offended  public  sentiment; 
viz.,  the  right  of  the  city  government  to  revoke 
all  locations  in  the  streets.  This  right  with  regard 
to  the  West  End  Company  was  made  subject  in 
1887  to  the  Board  of  Railway  Commissioners,  as 
it  was  in  1897  in  the  case  of  all  other  railways  of 
the  State.  In  1897  the  West  End  Company  was 
allowed  to  lease  its  road  to  a  new  elevated  com- 
pany ;  and  this  company  was  guaranteed  a  5-cent 
fare  for  25  years  unless  its  "  net  divisible  income 
after  paying  all  expenses  of  operation,  interest, 
taxes,  rentals,  and  other  lawful  charges,  and  after 
charging  off  a  reasonable  amount  for  depreciation," 
should  yield  more  than  eight  per  cent  per  annum 
on  its  stock.  Further,  for  this  25  years  "  no  taxes 
or  excises  not  at  present  in  fact  imposed  on  street 
railways  shall  be  imposed  in  respect  of  the  lines 
owned,  leased,  or  operated,"  by  this  corporation 
other  than  those  at  the  Sifme  time  imposed  by 
general  law  on  all  street-railway  companies.  In 
return  for  all  these  and  other  favors,  the  Elevated 
Company  is  to  pay  an  annual  tax  of  seven-eighths 
of  one  per  cent  of  the  gross  earnings  of  all  its 
owned  or  leased  lines  ;  and  if  its  annual  dividends 
exceed  6 .  per  cent,  it  is  to  pay  an  additional  sum 
equal  to  the  excess   of   the   dividend  above  this 


554  MUNICIPAL  MONOPOLIES. 

6  per  cent.  In  June,  1898,  when  a  few  additional 
taxes  were  imposed  upon  street  railways  in  return 
for  many  privileges,  such  as  were  already  enjoyed 
by  the  West  End  Company,  it  was  especially  pro- 
vided that  these  extra  taxes  should  not  be  paid  by 
the  latter  company. 

The  net  result  of  Massachusetts  street-railway 
regulation  has  been  seen  not  in  the  reduction  of 
fares,  but  in  the  increasing  restrictions  upon  capi- 
talization, which  has  fallen  from  $52,963  per  mile 
in  Sept.  30, 1894,  to  144,683  Sept.  30, 1897,  when 
there  were  1,414  miles  of  track.  Part  of  this 
fall,  however,  was  due  to  the  building  of  some  new 
lines  where  traffic  was  expected  to  be  light,  and 
the  construction  was  therefore  cheap.  Prices  of 
material  had  also  greatly  fallen.  The  average  cap- 
italization on  the  4,584  miles  of  road  in  the  central 
States  —  Ohio,  Indiana,  Illinois,  Michigan,  Wis- 
consin, Minnesota,  Iowa,  Missouri,  and  Kentucky 
—  was  over  twice  as  great,  or  $ 91,500,  although 
the  number  of  cars  per  mile,  according  to  The  /Street 
Railway  Journal  for  Aitgust,  1898,  was  3.78,  which 
was  exactly  the  same  as  in  Massachusetts.  The 
figures  for  capitalization  are  taken  from  the  Octo- 
ber, 1897,  edition  of  the  same  journal. 

According  to  the  same  authority,  the  4,495  miles 
of  track  in  New  Jersey,  New  York,  Pennsylvania, 
Delaware,  Maryland,  Virginia,  West  Virginia,  and 
the  District  of  Columbia,  had  $138,600  of  capital- 


STREET  RAILWAYS.  555 

ization  per  mile  of  track,  or  three  times  that  in 
Massachusetts,  although  the  number  of  cars  per 
mile  was  only  4.56,  or  23  per  cent  more  than  in 
Massachusetts. 

Even  the  Massachusetts  capitalization  would  be 
nearer  $35,000  than  $45,000  per  mile  if  capitalized 
as  strictly  in  accordance  with  the  cost  of  duplica- 
tion as  is  the  admirable  road  in  Springfield,  Mass., 
whose  60  miles  of  track,  with  three  cars  and  a 
traffic  of  180,864  passengers  per  mile,  is  capitalized 
for  only  $30,829.08  per  mile,  and  can  be  dupli- 
cated, according  to  the  report  of  the  expert  of  the 
Massachusetts  Board,  for  about  $31,500. 

The  Massachusetts  Board,  in  its  report  of  January,  1898, 
states  that  it  "  caused  "  an  investigation  to  be  made  in 
1897  of  the  tangible  assets  of  the  West  End  Company,  and 
found  they  could  be  duplicated  for  125,606,807.87,  or  $99,- 
480  per  mile,  or  about  2  per  cent  less  than  its  net  indebted- 
ness and  stock  issues.  This  road  carries  647,083  passengers 
per  mile,  and  cost  more  to  construct  because  of  local  condi- 
tions than  most  other  roads  in  the  country ;  yet  there  are 
four  reasons  for  believing  that  the  road  could  be  duplicated 
for  less  than  $70,000  per  mile. 

1.  The  opinion  to  that  effect  expressed  to  the  writer  by 
officers  of  the  State  Board. 

2.  The  refusal  of  the  Board  and  of  the  West  End  Com- 
pany, and  all  others  concerned,  to  permit  examination  of 
this  appraisal,  although  many  other  appraisals  were  previ- 
ously shown  by  the  Board.       9 

3.  Mr.  E.  E.  Higgins,  an  excellent  authority  on  the 
subject,  gave  an  itemized  statement  in  The  Street  Railway 


556  MUNICIPAL  MONOPOLIES. 

Journal  for  March,  1896,  of  how  a  thoroughly  modern  plant, 
with  only  the  real  estate  actually  needed  for  the  business, 
and  with  275  miles  of  track,  could  be  built  in  Boston  for 
$17,237,000,  or  $62,680  a  mile.  A  proper  allowance  for 
paving  would  increase  this  amount  to  about  $70,000. 

4.  A  comparison  with  the  known  costs  of  many  other 
large  plants,  both  in  and  outside  of  Massachusetts,  confirms 
this  estimate. 


TARES   AND   PROFITS   EST   MASSACHUSETTS. 

The  West  End  Company,  after  paying  5  per 
cent  interest  on  its  $40,000  per  mile  of  bonds,  has 
averaged  6.84  per  cent  on  its  $60,000  of  stock. 
Had  this  stock  not  been  issued  in  excess  of  struc- 
tural values  during  the  consolidation  of  horse-car 
lines  in  the  eighties,  the  ratio  of  dividends  to  the 
value  of  the  physical  plant  would  have  been  pro- 
portionately larger.  The  average  dividend  on  the 
total  preferred  and  common  stock  in  1897  was 
7.69  per  cent. 

The  crooked  and  congested  character  of  Boston 
streets  has  prevented  much  increase  of  speed,  and 
therefore  of  profit,  under  electric  traction  as  com- 
pared with  horse-car  service.  The  public  has  of 
course  derived  great  benefit  from  the  suburban 
service,  and  from  the  increased  length  of  ride  pos- 
sible for  a  nickel.  The  average  length  of  ride  has 
doubtless  also  increased?  The  company  has  reaped 
its  benefits  in  part  through  finding  investment  at 


STREET  RAILWAYS.  557 

a  better  return  in  large  extensions  than  it  could 
do  in  a  competitive  business  at  equally  small  risks. 
A  considerable  proportion  of  the  earnings  of  the 
last  five  years  also  have  apparently  been  devoted, 
very  wisely,  to  bringing  up  the  value  of  the  physi- 
cal property  nearer  to  the  par  value  of  the  securi- 
ties than  hitherto.  As  for  the  rest  of  the  State, 
the  recent  street-railway  committee  holds  that  the 
roads  have  not  earned  fair  returns  on  their  invest- 
ment. The  committee  says,  "  Of  the  76  remain- 
ing acting  companies,  34  paid  no  dividends  in 
1897,  while  42  paid  dividends  of  from  1.25  per 
cent  to  10.5  per  cent,  averaging  4.29  per  cent." 
This  is  a  curious  under-statement,  since  in  1897, 
according  to  the  report  of  January,  1898,  of  the 
Board  of  Railroad  Commissioners,  only  28  compa- 
nies paid  no  dividends.  These  companies  operated 
only  one-seventh  of  the  mileage,  and  carried  one- 
twentieth  of  the  traffic  of  the  State.  Their  average 
length  of  track  was  only  7.5  miles,  and  their  aver- 
age number  of  passengers  per  mile  only  70,895, 
yielding  about  $3,350  of  gross  receipts.  The  48 
other  companies,  aside  from  the  West  End,  aver- 
aged 5.68  per  cent  dividends  on  the  nominal  capi- 
tal stock,  and  probably  over  7  per  cent  on  the 
structural  value  of  the  plants ;  yet  these  companies, 
with  an  average  capitalization  of  $33,785  per  mile, 
carried  only  135,616  passengers  per  mile,  yielding 
about  $6,800  of  gross  receipts  per  mile.     Condi- 


558  MUNICIPAL  MONOPOLIES. 

tions  thus  far,  however,  in  all  the  street  railways 
of  the  State,  have  been  very  exceptional,  because 
of  the  unusual  depreciation  incident  to  the  in- 
troduction of  electrical  appliances  —  a  depreciation 
which  the  State  has  to  some  extent  forced  the 
companies  to  make  up  before  declaring  large  divi- 
dends. Another  handicap  upon  the  street-railway 
companies  everywhere  has  been  the  feverish  exten- 
sion to  new  territories  of  constantly  diminishing 
returns.  As  this  ratio  of  expansion  for  the  older 
companies  is  not  likely  to  continue,  lower  fares 
in  the  larger  Massachusetts  cities  should  soon  be 
practicable. 

RECENT  CORPORATION  ENCROACHMENTS. 

Thus  far  the  strength  of  the  Commission  idea, 
when  fairly  sustained  by  law,  has  been  demon- 
strated. Its  weakness  is  also  beginning  to  appear. 
With  growing  financial  strength,  the  Massachu- 
setts street  railways  are  securing  enough  influence 
over  the  Legislature  to  cripple  the  Commission, 
and  secure  exemption  from  an  unpleasant  amount 
of  municipal  control. 

The  recommendations  of  the  Massachusetts  Spe- 
cial Street  Railway  Committee  were  twofold  : 
First,  the  ownership  of  the  track  or  road-bed  by 
cities  with  operation  by  private  companies ;  and 
second,  greater  security  to  the  companies  against 


STREET  RAILWAYS.  559 

efforts  of  city  governments  to  secure  low  rates  of 
fare  and  other  concessions.  As  might  be  ex- 
pected in  this  stage  of  development,  the  Legislature 
ignored  that  portion  of  the  report  looking  toward 
ownership  of  the  road-bed,  and  gave  the  private 
companies  all  of  the  many  favors  suggested  by  the 
committee. 

Hitherto  city  governments  have  held  a  great 
club  over  street  railways  in  the  right  to  order  re- 
moval of  the  tracks.  This  right  can  now  only  be 
exercised  subject  to  the  approval  of  the  Railroad 
Commission,  of  which  a  writer  in  The  Street  Rail- 
way Journal  for  September,  1898,  thus  speaks  : 
"Its  wise  decisions  have  probably  done  more  to 
establish  electric  railroading  in  Massachusetts  on 
a  sound  and  profitable  basis  than  any  other  single 
influence."  To  those  who  believe  that  a  some- 
what less  "  profitable  basis  "  might  be  beneficial 
to  the  public,  this  change  in  the  Massachusetts 
law  would  hardly  appear  an  improvement.  The 
law  might  well  have  provided  that  in  case  a  city 
went  so  far  as  to  order  the  removal  of  tracks  from 
one  or  all  of  its  streets  without  giving  another 
equally  good  location,  it  should  pay  to  the  com- 
pany the  structural  value  of  the  plant  so  far  as 
injured  or  rendered  useless  by  the  order  for  re- 
moval. Again,  when  companies  request  an  exten- 
sion of  tracks,  cities  can  no  longer,  as  hitherto, 
take  advantage  of  this  opportunity  to  secure  such 


560  MUNICIPAL  MONOPOLIES. 

farther  concessions  as  the  street  railway  may  con- 
sider the  extensions  to  be  worth.  The  railroads 
are  also  relieved  from  giving  tickets  or  passes  to 
public  officials,  except  policemen,  firemen,  and 
letter-carriers  in  uniform ;  indeed,  the  railways 
are  forbidden  to  extend  these  privileges  to  public 
officials.  They  are  also  relieved  from  keeping  the 
street  between  their  tracks  in  repair,  unless  the 
burden  is  imposed  in  original  grants.  In  return 
for  these  radical  departures,  two  very  moderate 
forms  of  taxation  are  imposed :  First,  a  tax  equal 
to  all  dividends  above  8  per  cent,  but  only  in 
case  the  dividends  have  averaged  6  per  cent  since 
the  company  began  to  operate  its  road.  Second, 
a  one  per  cent  tax  on  gross  receipts  if  they  do  not 
exceed  $4,000  per  mile  of  single  track,  2  per  cent 
of  the  receipts  when  between  $4,000  and  $7,000, 
2±  per  cent  when  between  $7,000  and  $14,000, 
2£  per  cent  when  between  $14,000  and  $21,000, 
2|  per  cent  when  between  $21,000  and  $28,000, 
and  in  all  other  cases  3  per  cent.  These  taxes  do 
not  compare  very  well  with  the  9  per  cent  tax 
on  gross  receipts  in  Baltimore,  or  the  low  fares 
in  Detroit  and  Toronto,  equivalent  to  a  15  per 
cent  tax  of  gross  receipts.  The  Toronto  Company 
not  only  collects  an  average  fare  of  15  per  cent 
less  than  the  common  5-cent  fare  of  other  Amer- 
ican cities,  but,  as  we  have  seen,  pays  as  taxes 
over  8  per  cent  of  its  gross  receipts,  aside  from 


STREET  RAILWAYS.  561 

taxes  on  real  estate.  Thus  the  total  public  bur- 
dens of  the  Toronto  railway  in  the  way  of  low 
fares  and  taxes  are  equivalent  to  over  one-fifth  of 
its  probable  receipts  on  a  5-cent-fare  basis.  The 
entire  taxes  in  Massachusetts  in  1897  amounted 
to  $592,454.18,  or  only  3.7  per  cent  of  the  gross 
receipts  of  $15,898.89,  or  about  one  per  cent  of 
the  par  value  of  the  capital  stock  and  funded  debt. 
The  taxes  of  the  Boston  railways  were  4.27  per 
cent  of  their  income,  and  1.4  per  cent  of  the  stock 
and  funded  debt. 

The  West  End  Company  has  of  late  made  still 
greater  encroachments  on  the  rights  of  the  people. 
It  has  secured  for  25  years  a  total  exemption  from 
any  burden,  duty,  or  obligation  which  is  not  at  the 
same  time  imposed  by  law  on  all  street-railway 
companies.  The  State  cannot,  for  that  length  of 
time,  order  an  underground  conduit  system,  or 
any  new  safeguard  or  appliance  for  Boston's 
crowded  streets,  unless  ready  to  order  it  for  the 
far  different  conditions  elsewhere.  The  powerful 
financial  interests  back  of  this  company  have  also 
secured  State  approval  for  a  lease  guaranteeing 
for  25  years,  "  free  of  all  taxes,"  8  per  cent  on  its 
preferred  stock  and  7  per  cent  on  its  common 
stock,  which  even  the  late  appraisers,  with  all 
their  conservatism,  pronounced  impaired  8  per 
cent.  Seven  per  cent  on  stock  representing  in 
structural  value  only  92  per  cent  of  its  par  value 


562  MUNICIPAL   MONOPOLIES. 

is  7.63  per  cent  of  its  real  value.  Nevertheless, 
a  25-year  lease  in  Boston  is  better  than  a  999-year 
lease  in  Philadelphia  or  New  York,  or  even  a  50- 
year  lease  in  Cincinnati ;  and  the  Massachusetts 
Railroad  Commission  did  have  sufficient  backbone 
to  refuse  assent  to  a  99-year  lease,  and  a  guaranty 
of  8  per  cent  on  even  the  common  stock. 

With  all  its  defects,  the  Massachusetts  sys- 
tem of  State  regulation  has  succeeded  to  such  an 
extent  in  keeping  down  capitalization  to  normal 
limits  as  to  deserve  the  most  careful  study  and 
imitation  throughout  the  country.  Although  the 
writer  believes  in  ultimate  ownership  and  opera- 
tion of  street  railways,  the  movement  in  this  direc- 
tion would  be  rendered  easier  by  such  restrictions 
of  capitalization  as  prevail  in  Massachusetts,  to  say 
nothing  of  the  fair  amount  of  publicity  with  re- 
spect to  other  phases  of  the  street-railway  question 
that  have  been  secured  in  that  State.  There 
would  not  thus  be  so  many  so-called  "  innocent 
investors  "  to  protest  against  any  action  that  would 
ignore  the  water  in  their  stock.  It  is  much  easier, 
as  Massachusetts  has  found,  to  prevent  the  injec- 
tion of  water,  than  to  get  it  out  when  once  in. 

Berlin. 

The  best  that  the  continent  of  Europe  can  teach 
in  the  matter  of  street  railways  is  as  to  the  character 


STREET  RAILWAYS.  563 

of  term  franchises.  The  contract  recently  made 
between  the  city  of  Berlin  and  its  street  railways, 
as  given  in  the  Massachusetts  Special  Committee 
Report,  is  a  very  good  example  of  these  franchises 
for  limited  periods,  and  might  well  serve  as  a 
model  for  American  cities  that  are  not  ready  to 
adopt  city  ownership. 

Berlin  had  1,677,000  people  in  the  city  limits  in 
1895,  and  2,255,000  within  9|  miles  from  the  cen- 
ter of  the  city.  Its  260  miles  of  street  railway 
carried,  in  1896,  192,252,000  passengers.  There 
were  two  principal  lines  operated  by  horse-cars,  and 
a  few  other  small  ones  partially  electric.  The 
franchises  of  all  were  recently  extended  to  Dec. 
31,  1919,  under  the  following  conditions,  among 
others :  — 

1.  The  companies  must  unite,  and  convert  the 
entire  system  into  electric  traction. 

2.  If,  during  the  life  of  the  contract,  the  city 
authorities  require  extensions  within  the  city  lim- 
its, which  are  not  specified  in  the  contract,  the 
company  must  build  as  much  as  93  miles,  double 
track  being  counted  as  single.  But  the  company 
should  receive  from  the  city  one-third  of  the  cost 
of  construction  of  all  lines  ordered  between  Jan. 
1,  1902,  and  Jan.  1,  1907  ;  and  one-half  of  the 
cost  on  all  lines  ordered  between  Jan.  1,  1908,  and 
Jan.  1,  1914.  For  all  lines  ordered  after  that  the 
city  must  pay  the  full  costs  of  construction,  or  a 


5G±  MUNICIPAL  MONOPOLIES. 

full  allowance   towards  the  cost  of  operation,  as 
determined  by  later  agreement. 

3.  The  overhead  trolley  was  to  be  employed  at 
first,  except  where  the  city  demanded  storage  bat- 
teries ;  but  if  any  other  motor  system  should  later 
prove  practicable,  and  in  the  judgment  of  the  city 
authorities  should  appear  more  suitable,  the  com- 
pany may  introduce  it ;  and  if  the  city  authorities 
request,  the  company  must  introduce  it.  If  in- 
creased cost  accrue  to  the  company  thereby,  due 
allowance  being  made  for  benefits  obtained  from 
the  new  system,  the  city  must  indemnify  the 
company. 

4.  The  company  must  pay  to  the  city  8  per 
cent  of  its  gross  receipts  on  streets  in  the  city  lim- 
its, and  also  one-half  of  the  excess  of  its  net  divis- 
ible income  above  12  per  cent  on  its  present  capital, 
and  6  per  cent  on  any  additional  capital. 

5.  The  company  must  maintain  its  street  pav- 
ing, but  cleaning  and  sprinkling  are  done  by  the 
city. 

6.  Suitable  waiting-rooms  at  terminal  and  in- 
termediate stations,  warmed  in  winter,  must  be 
established  at  the  request  of  the  city  authorities. 

7.  The  cars  are  to  be  so  built  that  the  use  of 
"  running  boards "  by  conductors  outside  of  the 
cars  shall  not  be  necessary,  and  motor  men  are  not 
to  be  employed  more  than  ten  hours  a  day,  except 
on  special  occasions. 


STREET  RAILWAYS.  565 

8.  Three  years  after  the  signing  of  the  contract 
the  companies  shall  not  charge  more  than  1\  cents 
within  the  city  limits  nor  ontside  of  them  to  the 
end  of  every  line  in  20  enumerated  suburbs. 
Commutation  and  scholars'  tickets  must  be  issued 
on  every  line  at  reduced  rates,  and  also  at  certain 
hours  reduced  rates  must  be  given  to  workingmen. 

9.  At  the  end  of  the  contract,  all  property  of 
the  road  located  in  the  city  streets,  including  poles, 
wires,  any  waiting-rooms  built  on  city  property, 
and  patents,  come  into  the  possession  of  the  city 
without  charge. 

10.  Provision  is  made  for  various  courts  of 
arbitration  to  settle  disputes  and  disagreements 
between  the  parties  to  the  contract. 

11.  Within  six  months  after  the  date  of  the 
contract  the  company  must  establish  a  pension 
fund  for  all  employees. 

This  careful  guarding  of  the  rights  of  both  the 
company  and  the  people,  and  the  provision  for  the 
disposal  of  the  property  at  the  end  of  the  contract, 
are  worthy  of  all  praise. 

PUBLIC    OWNERSHIP   IK   AMERICA. 

The  only  two  street  railways  owned  and  oper- 
ated by  public  authorities  in  America  are  the  two 
miles  of  single  track  of  cable  across  the  Brooklyn 
Bridge,  and  the  small  plant  at  Port  Huron,  Ontario. 


566  MUNICIPAL  MONOPOLIES. 

The  Brooklyn  Bridge  Railway  has  been  famous 
since  1883  for  its  enormous  traffic,  efficient  service, 
remarkable  freedom  from  accident,  and  its  admi- 
rable treatment  of  its  employees.  It  has  hauled 
over  500,000,000  passengers,  with  only  two  fatal 
injuries,  one  to  a  passenger,  and  one  to  a  trainman, 
and  one  other  serious  injury  to  a  passenger.  The 
total  amount  of  time  lost  on  the  railway  by  delays 
from  all  causes  in  1896  was  only  4  hours  48  min- 
utes, an  average  of  40  seconds  per  day,  and  of  one 
minute  for  each  152,765  passengers  carried.  The 
writer  made  a  personal  investigation  of  the  treat- 
ment of  employees  in  1897,  and  found  that  the 
engineers  received  50  cents  per  hour  for  8  hours, 
or  $4  a  day,  and  the  firemen  29 1  cents  an  hour,  or 
$2.37  a  day;  while  the  engineers  on  the  privately 
owned  elevated  roads  in  New  York  and  Brooklyn 
received  $3  a  day  the  first  year,  and  13.50  after- 
wards per  day  of  1 0  hours,  and  the  firemen,  for  a 
similar  10-hour  day,  received  $2  in  New  York  and 
$1.75  in  Brooklyn.  The  ordinary  train-hands  on 
the  Bridge  Railway  received  $2.86  for  an  8-hour 
day,  as  contrasted  with  $1.50  to  $2.30  for  a  10- 
hour  day  on  the  elevated  road*.  The  Bridge  Rail- 
way employees  also  received  free  medical  atten- 
dance in  case  of  injury,  and  usually  half  their 
regular  wages  as  long  as  needed,  a  two  weeks'  va- 
cation on  full  pay,  rubber  coats  and  gloves,  and 
two  suits  of  uniforms  a  year.     The  employees  of 


STREET  RAILWAYS.  567 

the  private  owned  roads  said  they  had  none  of 
these  advantages,  but  had  to  pay  $9.80  for  their 
summer  suit,  and  $12.60  for  their  winter  suit.  The 
road  has  charged  3  cents  for  a  single  fare  or  2 
tickets  for  5  cents,  and  has  received  an  average 
fare  of  2.73  cents.  In  1897,  the  last  year  for 
which  an  official  report  is  at  hand,  the  total  cost 
of  transportation  for  the  nearly  46,000,000  passen- 
gers in  that  year  was  apparently  about  $200,000 
less  than  the  receipts,  if  the  expenses  for  interest 
and  extensions,  policemen,  and  some  other  charges 
connected  with  other  parts  of  the  bridge,  be  ex- 
cluded. In  fact,  if  a  full  separation  could  be  made 
of  the  railway  expenses  from  the  other  expenses 
of  the  bridge,  it  is  quite  likely  that  more  than 
$200,000  of  excess  of  receipts  would  be  brought 
to  light ;  but  even  the  latter  amount  to  be  credited 
to  depreciation  and  profit  is  13^  per  cent  on  the 
$1,500,000  which  the  chief  engineer  and  super- 
intendent of  the  road,  Mr.  Charles  C.  Martin,  de- 
clares was  the  cost  of  the  road  itself,  although  the 
road  and  bridge  together  are  said  to  have  cost 
$15,000,000. 

In  order  to  accommodate  the  elevated  roads  of 
New  York  and  Brooklyn,  and  permit  of  travel  from 
any  part  of  one  road  to  any  part  of  the  other  with- 
out changing  cars,  the  Brooklyn  Railway  now  per- 
mits the  elevated  railway  trains  to  cross  the  bridge, 
although  it  thereby  will  lose  a  large  portion  of  the 
traffic  that  has  hitherto  used  its  own  cars. 


568  MUNICIPAL   MONOPOLIES. 

Port  Arthur,  Ontario. 

The  only  example  of  city  ownership  and  opera- 
tion of  a  street  railway  on  the  continent,  aside 
from  that  over  the  Brooklyn  Bridge,  is  that  at 
Port  Arthur,  Ontario,  a  place  of  only  2,698  popu- 
lation in  1890.  The  road  is  of  course  too  small 
to  present  many  lessons  or  any  evidence  of  finan- 
cial success ;  but  the  following  facts  may  be 
given. 

The  road  is  electric,  with  eight  miles  of  track, 
two  cars,  and  two  trailers,  with  a  maximum  grade 
of  two  per  cent,  and  an  average  grade  of  1|  per 
cent.  The  cost  of  building  and  equipment  of  the 
system  was  about  $112,500,  or  $14,063  per  mile, 
for  which  5  per  cent  bonds  were  issued.  On  an 
average,  each  passenger  rides  three  miles,  and  pays 
5  cents  fare.  The  number  of  passengers  was 
158,573  in  1895,  and  165,489  in  1897.  This,  of 
course,  means  that  the  total  gross  receipts  were 
only  about  $8,274.45  in  1897,  or  $1,034.31  per 
mile,  and  the  car-miles  per  mile  of  track  were 
8,500.  Hence,  the  gross  receipts  must  have  been 
about  12.3  cents  per  car-mile.  The  operating 
expenses  were  probably  large  proportionately  in 
so  small  a  plant,  but  are  not  reported.  The  28 
smallest  private  companies  in  Massachusetts  which 
had  average  gross  receipts  per  mile  in  1897  of 
$3,550  paid  no  dividends. 


STREET  RAILWAYS.  569 

In  June,  1897,  the  town  installed  an  electric- 
light  system  of  1,000  incandescent  lights  of  16 
candle-power,  in  connection  with  this  railway. 

BRITISH  EXPERIENCE. 

England  is  attracting  world-wide  attention  in 
street-railway  circles  by  its  experiments  in  city 
operation  of  tramways.  These  experiments,  how- 
ever, are  scarcely  three  years  old  outside  of  Hud- 
dersfield,  Plymouth,  Leeds,  and  Glasgow ;  and 
only  one  of  these  latter  towns,  Huddersfleld,  began 
municipal  operation  before  1893,  although  muni- 
cipal ownership  of  the  track  has  been  common  in 
England  since  1870.  In  fact,  the  House  of  Com- 
mons, prior  to  1896,  had  a  standing  order  forbid- 
ding the  introduction  of  any  Act  for  such  a  purpose. 
Huddersfleld  and  the  two  or  three  other  towns 
that  began  public  operation  before  1896  were 
places  where  no  private  company  could  be  found 
willing  to  undertake  the  work. 

Many  mistakes  are  made  in  America  in  arguing 
from  British  experience.  The  Massachusetts  Spe- 
cial Street  Railway  Committee,  for  example,  con- 
gratulates Massachusetts  upon  having  as  low  a 
capitalization  per  mile  as  Great  Britain,  although 
electric  traction  such  as  prevails  in  Massachusetts 
is  more  expensive  to  construct  than  are  horse 
railways  such  as  prevail  in  Great  Britain.      But 


570  MUNICIPAL  MONOPOLIES. 

this  leaves  out  of  consideration  the  fact,  (1)  that 
the  street  railways  of  Great  Britain  are  confined 
to  the  very  large  cities  where  real  estate  and  pav- 
ing are  most  expensive,  and  (2)  that  the  788,569,- 
669  passengers  carried  on  the  1,507  miles  of  track 
in  Great  Britain  in  1897  were  the  equivalent  of 
523,271  passengers  per  mile,  while  the  308,684,224 
passengers  carried  on  1,517  miles  of  railway  in 
Massachusetts  the  same  year  were  equivalent  to 
only  203,525  passengers  per  mile.  Hence,  the 
equipment  necessary  per  mile  of  track  was  larger 
in  Great  Britain  than  in  Massachusetts.  Doubtless 
this  density  of  traffic  was  one  reason  why,  with 
average  receipts  per  passenger  in  the  United  King- 
dom in  1897  of  only  2.61  cents,  the  operating 
expenses  were  kept  down  to  1.97  cents  per  pas- 
senger. Another  reason  for  the  lower  fare  abroad 
is  the  shorter  distance  traveled,  and  the  fact  that 
wages  are  only  about  one-half  as  much  for  the 
various  classes  of  labor  as  in  this  country.  The 
wages  are  one-half  of  the  total  operating  expenses 
of  the  Glasgow  railways.  The  difference  in  wages 
is  equivalent  to  about  two-thirds  of  a  cent  per 
passenger.  It  is  quite  likely  that  the  disadvan- 
tages in  most  American  street  railways  outside  of 
our  largest  cities,  the  higher  wages,  and  the  longer 
haul,  will  not  account  for  the  fact  that  fares  are 
nearly  twice  as  high  in  America  as  in  Europe ;  but 
it  is  evident  that  many  of  the  students  of  muni- 


STREET  RAILWAYS.  571 

cipal  railways  abroad  have  not  made  sufficient 
allowance  for  these  factors.  On  the  other  hand, 
the  opponents  of  municipal  operation  of  such  rail- 
ways have  made  an  unsound  use  of  the  fact  that 
municipally  managed  railways  in  Europe  are  less 
developed  in  the  matter  of  electric  traction,  exten- 
sion to  the  suburbs,  etc.,  than  American  private 
owned  roads.  All  street  railways  throughout 
Europe  under  private  ownership,  as  are  most  of 
them,  are  equally  backward. 

A  conclusive  proof  of  this  is  that  with  all 
lengths  and  characters  of  franchises  in  different 
countries  and  cities,  there  were,  on  Jan.  1,  1898, 
only  1,422.6  miles  of  electric  street  railways  in  all 
Europe,1  or  less  than  in  the  single  State  of  Massa- 
chusetts, where  franchises  until  1898  have  been 
subject  to  revocation  any  day  at  the  discretion  of 
the  local  government.  Chicago,  with  only  twenty- 
year  franchises,  had  been  favored  prior  to  Jan.  1, 
1898,  with  872  miles  of  surface  roads  equipped 
for  electric  and  cable  traction.  According  to  Mr. 
Porter,  all  Europe,  with  400,000,000  inhabitants, 
has  only  7,500  miles  of  tramways,  or  one  mile  to 
each  53,333  inhabitants,  while  America  has  16,000 
miles  of  street  railway  for  its  72,000,000  of  people, 
or  a  mile  for  every  4,500.  America  equally  excels 
in  the  per  capita  distribution  of  sewing-machines 
and  reapers.     Such  facts  prove  nothing  as  to  the 

1  U.  S.  Consular  Report,  October,  1898. 


572  MUNICIPAL  MONOPOLIES. 

relative  merits  of  certain  governmental  policies  on 
the  two  continents. 

Again,  the  narrowness  of  the  English  city  streets, 
the  fear  of  endangering  life,  and  other  motives, 
have  led  the  English  Board  of  Trade  to  place  snch 
restrictions  upon  the  speed  of  English  tramways  as 
to  prevent  much  of  the  profit  which  comes  from 
electric  traction  in  America.  The  slow  develop- 
ment of  English  street  railways  is  also  partly 
accounted  for  by  the  habit  of  the  people  from  time 
immemorial  to  live  over  their  places  of  business 
instead  of  in  suburbs,  so  that  street  railways  have 
not  been  as  much  needed  nor  as  profitable  as  in  the 
United  States.  A  wide-awake  American  traveler 
can  easily  find  that  many  enterprises  in  Europe, 
having  no  connection  with  public  ownership  or 
even  with  city  franchises  —  for  example,  eleva- 
tors, banks,  hotels,  and  labor-saving  machinery  in 
excavating  or  building  —  are  less  used  or  developed 
than  in  America. 

HUDDEESFIELD. 

Huddersfield,  from  the  beginning  of  the  tram- 
ways in  1882,  until  1897,  was  under  orders  from 
the  Board  of  Trade  to  lease  its  street-railway  lines 
as  soon  as  a  reasonable  offer  could  be  obtained 
from  a  private  company.  Hence  it  is  not  surpris- 
ing if  public  ownership  failed  of  financial  success 


STREET  RAILWAYS.  573 

where  private  ownership  did  not  venture  to  enter. 
The  claim  of  Mr.  Robert  P.  Porter1  that  an  Amer- 
can  sydicate  would  probably  have  undertaken  the 
work  can  be  quickly  dismissed ;  for  the  situation 
in  this  English  city  was  widely  advertised,  and  not 
unknown  in  America.  Because  of  the  steep  grades, 
horse  traction  was  impossible.  Electric  traction 
was  not  known  in  America  until  1887,  nor  in  Eng- 
land until  much  later.  The  steam-engine  was 
used  on  the  streets  of  Huddersfield.  Up  to  April 
1,  1896,  the  receipts  seem  to  have  covered  all  ex- 
penses of  operation  and  depreciation  except  inte- 
rest. During  the  last  two  years,  ending  April  1, 
1888,  tramways  have  paid  interest  also,  and  laid 
aside  a  small  surplus.  The  hours  of  the  employees 
were  reduced  to  8  in  1898,  before  the  demand  for 
an  8-hour  day  had  become  prominent,  while  the 
wages  continue  to  be  slightly  higher  than  usual  for 
that  class  of  employment  in  England. 

Plymouth,  Blackpool,  and  Leeds. 

In  Plymouth,  a  city  of  100,000  inhabitants, 
a  private  company,  after  partially  constructing  a 
short  line  of  three  and  one-half  miles,  failed.  No 
other  company  could  be  induced  to  continue  the 
work  ;  and  the  city  was  permitted,  indeed  forced,  to 
undertake  the  business  itself.  It  is  not  surprising, 
1  Massachusetts  Special  Report,  Appendix  E. 


574  MUNICIPAL  MONOPOLIES. 

therefore,  that  it  has  only  earned  about  two-thirds 
of  the  interest  on  the  plant,  after  paying  all  other 
expenses.  But  traffic  is  now  rapidly  increasing ; 
and  the  introduction  of  electricity,  as  in  almost 
all  the  other  city  operated  lines  in  Great  Britain, 
promises  great  advantages,  financial  and  otherwise. 

Blackpool,  with  40,000  population  and  7  miles 
of  track,  was  unable  to  secure  a  reasonable  offer 
from  a  private  company,  and  began  operation  of 
its  tramways  about  fours  years  ago.  In  1895- 
1896  and  in  1896-1897  it  earned  a  slight  surplus 
above  interest,  sinking-fund,  and  taxes.  It  is  not 
generally  the  aim  of  city  undertakings  to  earn  a 
large  profit,  but  to  give  to  the  people  the  benefit  of 
low  charges,  which  in  this  case  average  3.32  cents. 

Leeds,  with  400,000  population  and  14  miles  of 
track,  already  partly  transformed  into  electric  trac- 
tion, obtained  its  tramways  from  a  private  com- 
pany after  the  expiration  of  a  lease  by  paying  the 
structural  value  as  the  law  permits.  After  paying 
interest,  sinking-fund,  and  taxes,  the  city,  in  1895- 
1896  and  1896-1897,  had  a  surplus  of  from  2  to 
2|  per  cent  each  year  on  the  capital  of  <f  210, 698. 
The  city  is  now  making  new  extensions  and  devel- 
oping electric  traction. 

Glasgow. 

This  city,  with  a  population  of  703,920  in  1891, 
had  always  owned  its  track,  and  being  unable  to 


STREET  RAILWAYS.'  575 

obtain  the  terms  desired  from  the  old  company  at 
the  expiration  of  the  lease  in  1894,  decided  to  op- 
erate the  lines  itself.  The  General  Tramways  Act 
of  1870,  as  has  already  been  stated,  had  allowed 
cities  to  construct  tramways  and  lease  them,  but 
did  not  permit  direct  public  operation  except  in 
the  lack  of  any  reasonable  offer  from  a  private 
corporation.  The  special  Act,  however,  allowing 
Glasgow  to  construct  its  tramways,  had  passed 
Parliament  in  1870,  without  any  attention,  appar- 
ently, having  been  paid  to  the  clause  authorizing 
the  municipality  to  take  over  the  lines  at  the  ex- 
piration of  a  20-year  lease  to  a  company  with  all 
that  company's  rights  and  powers.  Among  these 
"  rights "  was,  of  course,  the  right  of  operation. 
This  paved  the  way  for  the  most  important  exper- 
iment thus  far  in  public  operation,  and  one  which 
is  leading  many  English  municipalities  along  the 
same  line.  Keir  Hardie,  the  famous  labor  leader, 
informs  the  writer  that  the  failure  of  a  strike  on 
the  privately  managed  tramways  of  Glasgow  did 
much  to  prepare  the  mass  of  the  voters  for  the 
change  of  management.  The  city  has  been  criti- 
cised for  buying  a  new  horse-car  equipment  in 
1894,  with  new  barns,  etc.,  but  no  other  course 
was  within  its  reach.  The  private  company  would 
not  turn  over  its  own  equipment,  at  least  at  any 
fair  valuation,  nor  would  it  allow  any  transforma- 
tion of  its  lines  to  electricity  by  the  city  until  the 


576  MUNICIPAL  MONOPOLIES. 

day  tnab  its  own  contract  expired.  The  new  build- 
ings  and  cars  of  the  city,  however,  were  designed 
with  reference  to  the  needs  of  an  electric  road ;  and 
the  city  at  once  set  about  the  investigation  of  the 
best  form  of  electric  traction,  and  in  October,  1898, 
put  in  operation  its  first  piece  of  overhead  construc- 
tion electric  railway,  using,  as  will  most  cities,  the 
overhead  trolley. 

The  73  miles  of  single  track,  nearly  all,  how- 
ever, built  as  double  track,  carried,  May  31, 1897- 
1898,  106,344,437  passengers,  or  1,456,773  per 
mile.  A  small  portion  of  the  road  is  leased  from 
a  private  company.  The  65  miles  owned  in  1898 
had  a  capital  charge  of  about  $44,900  a  mile. 

It  is  claimed  by  Mr.  Porter  that  the  city  was 
especially  favored  in  undertaking  city  operation  by 
the  fact  that  the  track  obtained  by  the  private 
company  had  been  partly  paid  for  by  it.  Yet  there 
remained  a  debt  of  about  $  11,248  per  mile,  which 
could  not  have  been  much  below  the  value  of  the 
partly  worn-out  horse-railway  track. 

Among  the  benefits  obtained  by  the  city  from 
public  ownership  have  been  the  following:  1.  A 
change  in  hours  of  labor  and  the  provision  of 
uniforms  by  the  city.  This  was  considered  by 
the  old  company  as  worth  £13,085  a  year,  when 
they  were  asked  by  the  city,  as  one  condition  of  a 
new  lease,  to  give  similar  favors  to  the  men.  A 
further   gain  to  the    employees    has    come   since 


STREET  RAILWAYS.  577 

September,  1896,  in  a  raise  of  wages  equivalent 
to  £5,300  a  year.  These  two  items  together,  of 
about  =£18,000  a  year,  deserve  to  be  considered  in 
connection  with  the  profits  of  the  undertaking. 

2.  The  service  was  improved.  The  city  re- 
fused to  imitate  the  example  of  the  private  com- 
pany by  defacing  its  cars  with  advertisements, 
and  it  had  to  meet  the  fierce  competition  of  the 
175  omnibuses  of  the  old  company.  This  it  soon 
overcame,  with  its  over  385  new  cars. 

3.  The  city  has  made  large  profits,  and  has 
every  prospect  of  doing  still  better  when  electricity 
is  substituted  for  horse  traction,  as  it  soon  will  be. 
The  following  table  will  show  the  growth  of  traffic 
and  the  net  profit  under  city  operation  after  de- 
ducting the  rent  of  seven  miles  of  track  not 
owned  until  recently  by  Glasgow,  and  after  the 
further  important  deductions  of  interest  and  taxes. 
Taxes  have  risen  from  ,£1,529  6s.  3d.  in  1895- 
1896  to  £11,486  lis.  9d.  in  1897-1898.  In  the 
latter  year  they  were  about  2  per  cent  of  the 
capital  and  3  per  cent  of  the  gross  receipts. 

TRAFFIC   AND   PROFITS. 

Excess  of  Receipts 
n   .  Number         above  Operating  Ex- 

Da-te.  Passengers.        penses,  Taxes,  and 

Interest. 
July  1,  1894-May  31,  1895  (11  Mo.)    57,104,647      £24,204    14s.    2d. 
June  1,  1895-May  31,  1896  86,462,594        70,610    15      6 

June  1,  1896-May  31,  1897  98,966,658        68,315    13    10 

June  1,  1897-May  31,  1898  106,344,437        82,149      7      1 


578  MUNICIPAL  MONOPOLIES. 

If  interest  be  added  to  the  £82,149  7s.  Id.  of 
profit  in  1897-1898,  the  total  amount  available  for 
depreciation  and  profit  was  £95,647  5s.  lid.,  or 
about  16  per  cent  on  the  capital  of  £600,000.  The 
city  treasury  is  presented  with  £9,000  yearly,  or 
about  lh  per  cent  on  the  capital  and  2i  per  cent 
on  the  gross  receipts.  The  rest  is  applied  to  can- 
celing the  debt,  improving  the  road,  and  to  the 
accumulation  of  a  reserve  for  extensions  and  the 
change  to  electric  traction.  A  few  miles  of  elec- 
tric road  were  opened  for  traffic  in  October,  1898, 
as  already  stated,  and  several  extensions  to  the 
suburbs  are  under  way. 

The  largest  amount  received  by  the  city  from 
the  private  company  as  a  license  or  franchise  tax 
was  £5,660  3s.  in  1893-1894.  The  company  also 
paid,  according  to  Mr.  R.  P.  Porter,  1950,454.09 
during  the  23  years,  or  an  average  of  £8,771  a 
year  toward  the  original  cost  of  the  road.  This 
£14,431  of  yearly  receipts  from  the  company  for 
these  two  purposes  during  the  last  and  best  part 
of  its  lease  may  be  compared  with  the  net  public 
receipts  of  £70,000  to  £82,000  a  year  since  May, 
1895,  or  more  safely  with  the  perhaps  £40,000  a 
year  left  after  full  allowance  for  depreciation. 

4.  The  fares  have  been  reduced  about  30  per 
cent.  This  is  computed  from  a  statement  in  the 
official  report  for  1896-1897,  that  if  the  old  rates 
of   fare  had  continued,  the  99,000,000  tramway 


STREET  RAILWAYS.  579 

passengers  would  have  been  charged  that  year 
X180,000  more  than  was  actually  paid.  This  is 
.88  of  a  cent  per  passenger.  As  the  98,966,658 
passengers  paid  that  year  X365,761,  or  1.8  cents 
per  ride,  the  average  before  must  have  been  about 
2.7  cents.  In  1897-1898  the  average  receipts  from 
passengers  were  1.78  cents,  and  the  operating  ex- 
penses were  1.34  cents  for  each  of  the  106,344,437 
passengers.  The  present  schedule  of  fares,  assum- 
ing one  penny  to  be  equal  to  2  cents,  is  .57  of  a  mile 
on  the  average  for  1  cent,  1.74  miles  for  2  cents, 
2.3  miles  for  3  cents,  3.45  miles  for  4  cents,  4.15 
miles  for  5  cents,  5.24  miles  for  6  cents.  A  work- 
ingman  can  travel  from  about  2  h  miles  for  2  cents, 
to  about  5h  miles  for  4  cents,  before  7  a.m.,  and 
between  5  and  6.15  p.m.  About  35  per  cent  of 
the  passengers  pay  only  one  cent  fare,  and  about 
half  pay  two  cents.  The  longest  distance  is  5| 
miles,  and  the  highest  fare  is  6  cents. 

As  elsewhere  stated,  it  is  not  reasonable  to  argue 
from  the  low  fares  in  Glasgow  that  American  com- 
panies with  higher  wages,  larger  haul,  and  less  dense 
traffic  could  afford  the  same.  Equally  absurd  is 
it  to  hold  city  ownership  or  even  short-term  fran- 
chises responsible  for  the  inferior  street-car  develop- 
ment of  Europe.  The  one  irrefutable  conclusion 
from  Glasgow  is  the  superiority  of  public  to  pri- 
vate ownership  under  such  conditions  as  prevail  in 
many  and  probably  in  most  British  cities  to-day. 


580  MUNICIPAL   MONOPOLIES. 

Sheffield  and  Other  CrrrES. 

As  one  result  of  Glasgow's  success,  Parliament, 
in  1896,  rescinded  its  standing  order  forbidding 
the  introduction  of  any  bill  for  municipal  opera- 
tion of  tramways,  and  unanimously  passed  an  Act 
permitting  Sheffield  to  operate  its  street  railways. 
Other  cities  soon  obtained  similar  powers.  It  was 
also  provided  that  after  the  expiration  of  a  lease 
or  permit  to  a  tramway  company,  which  can  be 
for  only  21  years,  a  municipality  can  purchase, 
"  upon  terms  of  paying  the  then  value  (exclusive 
of  any  allowance  for  past  or  present  profits  of  the 
undertaking,  or  any  compensation  for  compulsory 
sale,  or  other  consideration  whatever)  of  the 
tramway,  and  all  lands,  buildings,  works,  mate- 
rials, and  plant  of  the  promoters  suitable  to  be 
used  by  them  for  the  purpose  of  their  undertak- 
ing." The  obvious  interpretation  of  this  Act, 
that  cities  need  pay  only  for  the  structural  value 
of  the  property  less  depreciation,  has  been  con- 
firmed by  the  House  of  Lords  on  an  appeal  from 
the  lower  courts.  The  city  of  Sheffield  has  not 
only  increased  wages  £2,433  4s.  8^.,  or  appar- 
ently over  10  per  cent,  and  provided  uniforms  for 
its  employees,  but  secured,  in  1896-1897,  a  sur- 
plus, above  interest  and  sinking-fund,  of  about 
.140,000  on  a  capital  of  about  $650,000,  or  about 
6  per  cent.  It  has  also  reduced  fares  from  an  aver- 
age of  2,96  cents  per  passenger  to  2,66  cents. 


STREET  RAILWAYS.  581 

No  sooner  did  Parliament  open  the  door  to 
municipal  operation  in  1896,  than  a  score  of  Brit- 
ish cities  began  plans  accordingly.  Garcke's  Man- 
ual for  1888-1889  shows  that  public  authorities 
own  42  tramway  undertakings,  with  571  miles  of 
single  track,  while  117  private  companies  own  931 
miles.  Fifteen  of  these  public  owned  tramways, 
with  270  miles  of  track,  were  also  operated  by  the 
cities  in  the  fall  of  1898,  and  a  sixteenth,  bringing 
up  the  total  mileage  to  318,  will  be  so  operated 
after  Jan.  1,  1899.  The  company  last  mentioned 
is  one  of  24  miles  of  double  track  in  South  Lon- 
don. Nearly  all  of  this  318  miles  of  track  is  to 
be  electrically  equipped  as  soon  as  possible. 

The  English  cities  owning  and  operating  their 
tramways  in  the  fall  of  1898  were  as  follows  :  — 

Cities.  Population,     ^ff&c*. 

Aberdeen 135,942  10 1 

Blackburn 129,459  6 

Blackpool 35,000  5 

Bradford 228,909  9 

Dover 33,000  7 

Glasgow 703,920  73 

Halifax 94,775  4.25 

.       Huddersfield       f  100,463  22 

Hull 225,054  19 

Leeds 402,449  14 

Liverpool 644,129  48.7 

Nottingham 229,775  21 

Plymouth 98,121  3.6 

Sheffield 347,278  18 

South  Hampton 100,000  10 


1  Estimated  by  writer. 


270.55  miles. 


582  MUNICIPAL  MONOPOLIES. 

The  spirit  and  enthusiasm  attending  'this  new 
development  of  "  triumphant  democracy  "  is  illus- 
trated in  the  ceremonies  attending  the  inauguration 
of  city  operation  of  tramway  in  Aberdeen,  Scot- 
land, in  October,  1898,  as  reported  in  London:  — 

"  There  was  a  great  procession  through  the  streets  of 
decorated  cars,  consisting  of  39  cars  and  244  horses.  The 
sides  and  stairs  were  garlanded  with  foliage  ;  on  each  side 
was  a  shield  encircled  by  a  trophy  of  flags,  and  at  each  end 
a  similar  trophy  surrounded  a  shield  bearing  the  city  arms. 
Lines  of  streamers  adorned  the  upper  portion,  above  the 
heads  of  the  outside  passengers.  Six  cars,  each  drawn  by 
four  horses,  took  part  in  the  civic  procession  at  noon.  In 
place  of  the  usual  advertisement  board  along  the  sides  of 
the  cars  was  a  large  decorated  scroll  with  the  words  '  Suc- 
cess to  the  Corporation  Tramways.'  " 

The  Lord  Provost  and  the  rest  of  the  city  gov- 
ernment and  leading  citizens  took  part  in  the 
demonstrations,  which  included  a  banquet  with  in- 
teresting addresses,  and  a  supper  in  the  evening 
given  by  the  City  Council  to  the  180  tramway 
employees. 

In  the  investigation  thus  far,  attention  has  been 
directed,  (1)  to  the  more  or  less  successful  efforts 
of  a  few  cities  on  the  American  continent,  outside 
of  Massachusetts,  to  secure  large  taxes  and  low 
fares ;  (2)  to  the  great  success  of  Massachusetts 
in  preventing  any  considerable  amount  of  stock- 
watering  ;  (3)  to  the  restrictions  imposed  in  Berlin 


STREET  RAILWAYS.  583 

on  short  term  franchises ;  and  (4)  to  the  rapidly 
rising  tide  of  municipal  operation  in  Great  Britain. 
Since  observations  that  might  be  made  with  re- 
gard to  the  proper  kind  of  a  street-railway  fran- 
chise in  case  private  operation  prevails,  and  some 
of  the  broader  considerations  for  and  against  direct 
municipal  operation,  apply  equally  well  in  most 
cases  to  gas,  electric  light,  and  telephones,  any  fur- 
ther discussion  of  these  points  will  be  deferred 
until  the  concluding  chapter. 


Till. 

GAS. 


GAS. 


By  EDWARD  W.  BEMIS. 

THE    HISTORY  AND    PROSPECTS    OF    GAS 
MANUFACTURE. 

The  small  amount  of  space  at  the  writer's  com- 
mand for  this  chapter  prevents  more  than  a  mere 
reference  to  the  most  important  points.  Proofs  at 
hand  for  many  assertions  must  unfortunately  be 
omitted. 

The  importance  of  the  gas  question  has  of  late 
been  immensely  under-rated  by  the  public.  Despite 
the  competition  of  electric  light,  and  the  serious 
business  depression  following  1892,  the  use  of  gas 
increased  in  England  22.4  per  cent  from  1892  to 
1897,  or  almost  as  fast  as  in  the  previous  six 
years,  when  the  growth  was  30.4  per  cent.  In 
Massachusetts  in  the  six  years  ending  in  July, 
1891,  the  growth  was  39.6  per  cent,  and  in  the 
next  six  years  34.7  per  cent. 

With  the  introduction  of  the  Welsbach  burner, 
gas  is  even  proving  a  formidable  competitor  of 
electricity  in  street-lighting  in  Europe ;  while  the 
587 


588  MUNICIPAL   MONOPOLIES. 

rapid  exhaustion  of  natural  gas  and  the  cheapen- 
ing of  artificial  gas  are  fast  developing  the  use  of 
this  manufactured  product  for  fuel  purposes.  Mr. 
Alexander  Dow,  the  electrician,  frankly  concedes 
that  gas  is  a  much  cheaper  illuminant  than  electri- 
city, and  is  likely  to  remain  so.1  Even  if  muni- 
cipalities continue  to  use  only  electric  light,  it 
must  be  admitted  that  gas  is  a  monopoly,  and  that 
the  individual  gas  consumer  has  no  protection  from 
extortion  unless  it  is  given  by  the  city  and  the 
State.  For  the  public  authorities  to  ignore  mo- 
nopolies that  do  not  sell  directly  to  the  State  or 
city  is  not  justified  by  any  of  the  legal  principles 
and  decisions  discussed  in  a  previous  chapter  by 
Professor  Parsons.  Unless  the  American  people 
are  blind  to  their  true  interests,  they  will  soon 
demand  as  great  activity  in  public  regulation  or 
public  ownership  and  operations  of  gas-works  as  of 
electric-light  plants. 


PROFITS. 

*  Gas  companies  have  various  ways  of  concealing 
their  profits,  even  in  the  reports  they  are  forced  to 
make  to  the  Massachusetts  Gas  Commission.  Not 
only  are  exorbitant  salaries,  legal  fees,  and  "  legis- 
lative "  or  "  advertising  "  expenses  often  paid,  but 

1  Address  before  the  National  Electric  Light  Association  at 
Chicago,  June  8,  1898. 


GAS.  589 

directors  sometimes  justify  their  title  by  "  direct- 
ing "  the  money  of  their  corporations  into  their 
own  pockets  through  excessive  prices  for  oil,  acet- 
ylene patents,  or  other  properties  in  which  they 
are  personally  interested.  One  company  may  thus 
buy  from  another  for  60  cents,  or  even  a  dollar, 
in  the  holder,  gas  which  it  can  itself  make  for  20 
to  30  cents. 

In  Boston  the  cost  of  putting  885,480,000  feet 
of  excellent  water-gas  in  the  holders  of  the  Bay 
State  Company  was  only  33.3  cents  per  thousand 
feet  in  1892,  with  coal  at  $4.44  per  long  ton,  and 
oil  at  3.37  cents  a  gallon.  With  the  prices  for 
these  materials  that  prevail  between  Pittsburg 
and  the  Mississippi  River,  this  cost  would  have 
been  reduced  one-third.  The  cost  to  the  Boston 
Gas  Company  in  1892  for  distributing  1,191,985,- 
480  feet  of  gas,  largely  bought  from  this  Bay 
State  Company,  would  only  have  been  19.4  cents 
had  the  same  expense  for  salaries  per  thou- 
sand feet  (4.345  cents)  prevailed  as  in  1886,  in- 
stead of  10.8  cents.  In  this  statement  taxes 
(5.473  cents)  are  included,  but  not  the  expense  of 
caring  for  street-lamps  (3  cents),  which  is  not  part 
of  the  cost  of  gas  making  or  distribution. 

Yet  this  Boston  company,  instead  of  reporting 
to  the  Commission  total  operating  costs  of  33.3 
cents  plus  19.4  cents,  or  52.7  cents,  reported  these 
costs  as  $1.02.     It  was  only  with  great  difficulty 


590  MUNICIPAL   MONOPOLIES. 

that  an  investigating  committee  of  the  Massachu- 
setts Legislature  was  able  to  secure  the  real  facts 
as  above  given  from  the  vaults  of  the  Massachu- 
setts Gas  Commission ;  and  when  the  verbatim 
report  of  the  investigation  was  printed  by  the 
State,  all  these  data  were  mysteriously  omitted  — 
a  common  method  of  regulation  of  the  question 
of  light  by  keeping  the  people  in  darkness. 

The  two  chief  Chicago  x  companies  signed  state- 
ments in  1893  to  the  New  York  Stock  Exchange, 
showing  a  total  cost  of  gas  at  the  burner  of  only 
40  cents,  even  including  taxes.  The  official  re- 
port of  the  Mutual  Fuel  Gas  Company  of  Hyde 
Park,  Chicago,2  shows  that  it  sold  in  1897,  556,- 
887,200  feet  of  excellent  illuminating  water-gas 
for  $481,787,  an  average  of  87  cents  per  thousand 
feet,  at  an  expense  to  the  company,  including  taxes, 
of  $208,561,  or  37.45  cents  per  thousand  feet. 
This  company  had  no  bonds,  and  only  $1,500,- 
000  of  stock,  or  $2.69  per  thousand  feet.  All  it 
claimed  to  have  in  the  form  of  accumulated  sur- 

1  See  Report  of  Illinois  Bureau  of  Labor  Statistics  for  1896, 
concluding  chapter  on  Gas  Companies  of  Chicago.  This  report 
was  printed  by  a  new  administration,  without  any  opportunity  be- 
ing given  to  the  authors  for  reading  the  proof.  A  few  errors  thus 
crept  in.  Some  portions  were  totally  omitted  in  both  the  gas  and 
street-railway  chapters  written  by  the  author;  while  in  the  case 
of  the  gas  chapter,  the  appendices,  with  their  numbers  omitted, 
were  placed  before  the  chapter  instead  of  after  it,  and  several  of 
the  same  were  omitted.  This  much  of  explanation  is  necessary 
to  those  who  may  be  surprised  at  the  appearance  of  the  report. 

2  Chicago  Economist.    Investors'  Manual,  1898. 


GAS.  591 

plus  and  tangible  assets  was  12,119,667,  or  $3.80 
per  thousand  feet.  Even  8  per  cent  on  this  would 
only  mean  30  cents  per  thousand.  The  company 
apparently,  therefore,  could  have  sold  gas  at  a 
good  profit  at  67  cents  per  thousand  feet,  and 
there  is  abundant  information  to  prove  that  other 
Chicago  companies  could  do  as  well. 

Gas  can  be  sold  at  a  profit  on  the  structural  value 
of  the  plants  for  75  cents  per  thousand  feet  in  most 
of  the  cities  of  over  200,000  people  east  of  the 
Rocky  Mountains.  In  such  cities  the  cost  of  du- 
plication of  the  plants  would  rarely  exceed  $4.00 
per  thousand  feet  of  annual  output.  In  the  fa- 
mous Cleveland  Gas  Case  in  1892,  the  officers  of 
the  leading  gas  company  of  that  city  reported  the 
cost,  aside  from  depreciation  and  profit,  but  inclu- 
sive of  taxes,  as  38  cents  per  thousand  feet  at  the 
burner.  Mr.  Barker,  chairman  of  the  Massachu- 
setts Gas  Commission,  testified  that  seven  cents 
was  ample  for  depreciation,  and  such  has  been 
the  experience  in  the  Richmond  (Va.)  works  the 
past  ten  years.  This  would  mean  45  cents  as  the 
entire  cost  in  Cleveland  in  1890  and  1891,  aside 
from  profit.  Since  then  the  two  Cleveland  com- 
panies, one  with  an  output  of  only  161,000,000 
feet  in  1893-1894,  and  207,671,000  feet  in  1896- 
1897,  have  never  skipped  a  dividend  of  6  per  cent 
or  more,  although  allowed  to  charge  but  80  cents 
per  thousand  feet,  and  compelled  to  pay  back  6  per 


592  MUNICIPAL   MONOPOLIES. 

cent  of  that,  or  5  cents,  to  the  city,  in  addition  to 
the  ordinary  taxes. 

In  this  Cleveland  Case  the  evidence  seemed  to 
warrant  the  claim  of  the  city's  attorney,  General 
Meyer,  that  without  any  cash  payments  for  stock 
save  the  original  $100,000  about  1850,  there  had 
been  such  an  issue  of  new  securities  without  the 
passing  of  a  single  dividend  on  any  of  them,  that 
in  1892  an  original  investor  of  $1,000  was  in 
possession  of  $24,000  of  securities.  On  these  he 
was  receiving  yearly  6  per  cent,  or  144  per  cent  on 
his  only  cash  investment.  When  the  well-known 
manufacturer  of  gas  meters  and  gas  apparatus, 
John  Mcllhenny  of  Philadelphia,  was  asked  in 
court  his  opinion  of  this,  he  gave  the  following 
illuminating  answer :  — 

"  That  is  not  an  unusual  thing  in  this  growing 
country  at  all.  It  is  about  the  history  of  all  the 
prosperous  gas-works  ;  and  it  is  furthermore  about 
the  history,  as  you  have  explained  it,  of  all  pros- 
perous manufacturing  concerns." 

The  truth  of  the  last  part  of  his  answer  will  be 
seriously  questioned  by  some  business  men,  but 
there  is  abundant  evidence  of  a  large  measure  of 
truth  in  the  reference  to  gas  companies.  In  an 
affidavit  in  a  gas  case  in  Chicago  it  was  asserted 
that  only  $100,000  had  ever  been  paid  in  in  cash 
to  the  Chicago  Gas  Light  and  Coke  Company, 
whose  stock,  in  1887,  was  $4,984,000,  and  which 


gas.  593 

in  that  year  issued  a  dividend  in  bonds  of  $7,650,- 
000,  while  the  stockholders  almost  doubled  their 
stock  in  a  consolidation  of  companies  then  effected. 
Only  $750,000  in  cash  was  ever  paid  in  to  the 
oldest  of  the  New  York  companies ;  yet  this  com- 
pany, after  paying  dividends  averaging  on  this 
original  payment  40%  yearly  from  the  origin  of 
the  company,  had  increased  its  stock,  through 
stock  dividends,  to  $7,600,000  in  1884. 

The  public  are  prevented  from  realizing  the 
profits  of  these  companies  by  their  extensive 
stock  and  even  bond  watering.  For  example, 
The  Mutual  Fuel  Gas  Company  of  Chicago, 
above  referred  to,  was  bought  by  the  People's 
Gas  Company  in  1898  ;  and  in  lieu  of  its  $1,500,- 
000  of  stock  representing  $2,119,667  of  tangible 
assets,  the  purchasers  issued  $5,000,000  of  bonds, 
making  the  capitalization  $9.00  per  thousand  feet. 
It  is  $9.00  per  thousand  feet  of  annual  output  in 
all  of  the  Chicago  companies  ;  and  on  this  basis  they 
are  doing  so  well  with  gas  at  one  dollar  that  all 
their  securities,  representing  about  $20,000,000 
of  structural  value,  and  $40,000,000  of  free  gift 
by  the  people,  are  above  par. 

In  seeking  a  remedy  for  exorbitant  charges  in 
competition  rather  than  the  compulsory  reduction 
of  charges  through  State  and  city  authority  or 
public  ownership,  our  municipalities  have  usually 
made    matters    worse.      This   was     illustrated    in 


594  MUNICIPAL  MONOPOLIES. 

the  testimony  at  Cleveland  of  Captain  William 
Henry  White,  prominently  identified,  at  different 
times,  with  competing  companies  in  Boston,  Chi- 
cago, Baltimore,  Brooklyn,  and  elsewhere. 

"  Among  the  blessings  that  long-suffering  communities 
have  in  this  country  is  the  competing  company.  The 
municipal  authorities  always  feel  that  the  dear,  suffering- 
public  ought  to  have  additional  facilities  for  getting  cheap 
light,  and  on  occasion  they  let  in  an  opposition  gas  com- 
pany. They  produce  a  new  plant,  put  in  all  the  apparatus 
and  parallel  the  mains  of  the  other  company,  and  they  try 
for  a  while  to  fight ;  and  we  have  the  usual  gas  war,  with 
its  incidental  benefits  to  the  public.  And  then  the  two 
companies  get  together  and  say,  '  Well  now,  we  have  done 
the  philanthropic  act  long  enough,  and  we  think  the  public 
had  better  pay  for  this  little  picnic  of  ours.'  They  unite, 
and  usually  double  the  capital  when  they  unite,  of  course. 
And  as  it  happened  in  Boston,  this  work  went  on  to  a 
point  where  the  competing  company  united  with  the  old 
company,  the  competing  company  getting  hold  of  the  old 
company  and  uniting.  .  .  . 

..."  They  said  it  was  a  good  idea,  probably,  to  extend 
these  benefits  to  the  suffering  communities  on  the  outside, 
and  they  proceeded  to  incorporate  and  consolidate  all  the 
suburban  gas  companies  around  Boston,  and  when  they  got 
it  all  together,  they  found  they  had  a  capitalization  of  about 
$7,000,000,  if  my  memory  serves  me  right.  And  upon 
having  made  this  strong  combination,  they  proceeded  then 
to  issue  to  the  long-suffering  public  17J  million  dollars  of 
capital  stock.  So  that  while  the  municipality  of  Boston 
endeavored  to  lessen  the  burdens  and  brighten  the  path- 
way of  the  citizens  of  that  great  city,  they  succeeded  in 
adding  additional  burdens  to  them,  which  is  the  case  fie- 


GAS.  595 

quently  all  over  the  country.  The  same  story  in  Chicago  : 
capitalization  there  has  run  up  somewhere  in  the  neighbor- 
hood of  $30,000,000." 

The  witness  stated  that  on  this  $10,000,000  "of  wind 
script  stock,"  as  well  as  on  the  other  $7,000,000,  the  people 
of  Boston  had  been  paying  6  per  cent  dividends. 

Question.  —  "You  felt,  you  gentlemen,  among  you,  that 
this  was  discharging  the  higher  duty  that  you  owed  to  the 
community,  and  that  it  was  the  proper  example  to  set  to 
the  youth  of  America  in  that  regard?  " 

Answer.  —  "I  don't  think  that  the  financial  intellect  that 
led  that  operation,  —  it  was  out  of  my  department,  —  but 
the  financial  operation  which  led  the  people  out  of  Egypt 
and  distress  there,  didn't  consider  what  the  effect  upon  the 
youth  of  America  would  be,  but  the  effect  upon  himself." 

Question.  — "  In  the  language  of  one  who  has  acted 
similarly,  *  The  public  be  damned  '  ?  " 

Answer.  —  "I  am  inclined  to  think  that  that  was  the 
foundation  principle  of  the  thought.  At  the  same  time  it 
gets  back  to  the  original  proposition  that  the  competing 
company  is  not  a  panacea  for  the  ills  the  public  has  suf- 
fered. The  opposition  company  is  the  greatest  mistake 
that  is  ever  made.  I  get  money  from  building  them  oc- 
casionally.    I  never  organized  one." 

Massachusetts'  Experience. 

The  Massachusetts  Commission,  known  as  the 
Board  of  Gas  and  Electric  Light  Commissioners, 
was  created  in  1885,  with  certain  powers  over  gas 
companies.  Two  years  later  control  was  given 
over  electric  light  companies.  Three  men  con- 
stitute the  Commission,  one  being  appointed  every 


596  MUNICIPAL  MONOPOLIES. 

year  by  the  governor,  to  serve  for  three  years, 
with  salaries  of  $3,500.  The  chairman,  however, 
receives  $4,000,  a  clerk  $2,000,  and  $1,000  is  pro- 
vided for  books,  stationery,  and  other  incidental 
expenses,  aside  from  office  rent  and  the  printing 
of  the  annual  report.  The  salaries  and  incidental 
expenses  are  borne  by  the  companies  controlled  by 
the  board,  in  proportion  to  their  gross  earnings. 
The  Commission  was  given  authority  to  secure  as 
full  reports  as  it  might  desire  as  to  the  expenses 
and  assets  of  the  companies,  and  at  times  employs 
experts  to  make  special  investigations  of  the  struc- 
tural value  of  the  plants.  The  board  annually 
requires  the  filling  out  under  oath,  and  with  pen- 
alties for  false  statement,  of  elaborate  schedules 
of  details  of  the  lighting  monopolies  of  the  State. 
The  latter  must  also  keep  their  books  in  the  man- 
ner prescribed  by  the  board,  and  must  allow  the 
latter  to  examine  them  at  any  time.  On  petition 
of  twenty  consumers,  or  of  the  mayor  of  a  city, 
or  the  selectmen  of  a  town,  the  Commission  must 
give  a  hearing,  make  an  investigation,  and  issue 
an  opinion  or  order  relative  to  the  proper  price 
of  light;  whether  a  new  company  should  be  ad- 
mitted to  a  city ;  whether  more  securities  should  be 
issued ;  whether  better  quality  of  light  should  be 
supplied  —  in  fact,  almost  any  grievance  of  the 
consumer  can  be  brought  before  the  Commission  ; 
and  any  disobedience  of  its  orders  is  turned  over 


gas.  597 

to  the  attorney  general,  who  is  expected  to  take 
proper  legal  action  to  enforce  the  decision  of  the 
board. 

The  work  of  the  Commission  is  so  much  like 
that  of  the  Street  Railroad  Commission  described 
in  the  last  chapter  that  it  is  not  necessary  to 
repeat  here  what  was  there  said.  The  Gas  and 
Electric  Light  Commission,  as  the  final  court  of 
appeal,  have  never  allowed  a  single  competing  gas 
or  electric-light  company  in  the  State,  although  of 
course  an  electric-light  company  is  often  allowed 
in  a  city  where  there  is  a  gas  company,  and  some 
competition  may  arise  between  these  different  illu- 
minants.  Where  a  gas  company  already  in  the 
field  has  asked  permission  to  build  an  electric-light 
plant,  permission  has  usually  been  granted  to  it  in 
preference  to  an  independent  electric-light  com- 
pany, on  the  ground  that  except  in  the  greatest 
cities  there  are  possibilities  of  economy  in  the 
union  of  such  monopolies. 

But  the  power  of  wealth  has  induced  the  Legisla- 
ture at  three  different  times  to  reverse  its  declared 
policy,  and  without  regard  to  the  Commission 
to  incorporate  three  leading  companies  in  Boston, 
—  the  Bay  State,  the  Brookline,  and  the  Massa- 
chusetts Pipe  Line  companies.  The  Legislature 
has  admitted  the  folty  of  its  past  action  by  asking 
the  Commission,  in  1898,  to  report  a  plan  for  the 
consolidation  of  the  Boston  companies. 


598  MUNICIPAL  MONOPOLIES. 

The  best  work  of  the  Commission  has  consisted 
in  this  restriction  of  new  companies  outside  of 
Boston,  and  in  its  check  upon  stock-watering. 
The  six  companies  in  the  State,  other  than 
those  of  Boston,  that  had  an  output  of  over 
60,000,000  feet  of  gas  in  1896-1897,  and  whose 
accounts  were  not  complicated  by  the  ownership  of 
electric-liglit  plants,  were  Cambridge,  Fall  River, 
Haverhill,  Lowell,  Springfield,  and  Worcester. 
These  six  companies  sold  447,696,775  feet  of  gas 
in  1885-1886,  with  a  capital  of  12,563,000,  or 
$5.72  per  thousand  feet.  These  same  companies, 
in  1896-1897  sold  983,998,884  feet,  with  a  capital 
stock  and  bonds  of  only  $2,825,000  or  only  $ 2.87 
per  thousand  feet.  If  these  companies  had  been 
located  in  any  other  State,  their  capital,  instead  of 
diminishing  one-half  per  unit  of  output,  would 
have  been  allowed  to  increase  to  $8.00  or  $10.00 
per  thousand  feet. 

The  Commission,  however,  has  been  as  great  a 
failure  in  its  control  of  the  large  Boston  companies 
in  this  matter  of  capitalization  as  in  that  of  com- 
petition. The  power  of  wealth  at  times,  without 
necessarily  any  direct  corruption,  rendered  the 
Commission  speechless,  and  made  the  Legislature 
its  pliant  tool ;  and  has  shown  the  difficulty  of 
framing  any  law  for  the  regulation  of  millionaires 
in  the  ownership  of  public  franchises  that  able 
lawyers  cannot  find  a  way  to  avoid. 


GAS.  599 

Ten  years  ago  the  Boston  companies,  with  an 
output  of  1,161,000,000  feet,  had  a  capital  of 
$4,500,000.  In  1898  the  output  was  almost  pre- 
cisely twice  as  much  as  in  1888,  while  in  the 
words  of  the  special  student  of  this  subject,  Pro- 
fessor John  H.  Gray  of  Evanston,  "the  nominal 
capitalization  depending  on  these  companies,  in- 
cluding some  new  issues  about  to  be  made,  is  in 
round  numbers  $99,000,000;"  i.e.,  an  increase  of 
23-fold. 

Mr.  Thomas  W.  Lawson,  until  lately  vice-pres- 
ident and  director  in  several  of  the  Boston  com- 
panies, and  negotiator,  as  he  himself  says,  "of 
the  various  settlements,  deals,  and  organizations 
that  have  been  consummated  or  attempted  in 
the  Boston  gas-field  during  the  last  three  years," 
stated  over  his  own  signature,  in  1897,  "  The 
Massachusetts  Pipe  Line's  mongrel  charter,  pro- 
cured from  the  1896  Legislature,  cost  about 
$500,000." 

An  editorial  in  the  Progressive  Age  for  Jan.  15, 
1898,  says:  "In  Wall  Street  such  mellifluous 
expressions  as  '  The  Boston  Skin  Game '  have 
aptly  served  to  designate  the  Bay  State  gas, 
while  the  '  Beans  Mystery '  has  been  commonly 
applied  to  the  general  situation.  .  .  .  The  speak- 
ers have  reasonable  ground  for  the  application 
of  invidious  reflections." 

All   this  is   exceedingly    important  as  showing 


600  MUNICIPAL  MONOPOLIES. 

that  in  self-satisfied  New  England,  the  home  of 
Puritanism  and  of  Missions,  the  relation  of  city 
monopolies  under  private  ownership  is  nearly  as 
disgraceful  as  in  many  Western  cities.  The 
trouble  is  with  the  system,  which  throws  enor- 
mous temptations  in  the  way  of  legislators  and 
regulating  bodies.  European  public  men  might 
resist  the  temptation;  our  own  seem  unable  to 
do  so. 

Although  the  Commission  has  not  often  or- 
dered reduction  of  rates,  yet  its  influence,  and 
the  competition  of  electric  light  and  other  causes 
forced  down  the  average  price  per  thousand  feet 
from  #1.72  in  1886  to  $1.17  in  1897. 

The  natural  tendency  of  a  monopoly  so  strongly 
protected  by  law  as  are  the  lighting  monopolies 
of  Massachusetts  would  be  toward  lack  of  pro- 
gressiveness.  The  lighting  business,  however,  is 
almost  as  complete  a  monopoly,  as  a  matter  of 
fact,  in  other  States ;  and  therefore  the  stimulus 
to  progress  in  improvements  is  not  much  dimin- 
ished by  the  Massachusetts  law,  and  the  action  of 
the  Commission  has  stimulated  progress  in  techni- 
cal ways.  The  annual  publications  of  the  board, 
while  suppressing  certain  vital  facts  necessary  to 
the  formation  of  a  correct  judgment  by  the  people 
as  to  the  reasonableness  of  the  charges  of  a  com- 
pany, do  give  so  many  facts  regarding  leakage, 
candle-power,    etc.,    as    to   incite    the    companies, 


GAS.  601 

possibly,  to  some  rivalry  in  the  reduction  of 
waste,  etc.  In  any  hearing,  also,  relative  to  the 
fairness  of  any  existing  prices  of  gas  or  electric 
light,  or  as  to  issuing  new  securities,  the  Com- 
mission lays  down  the  principle  that  the  com- 
panies must  keep  fairly  abreast  with  the  times 
in  their  improvements,  or  they  cannot  claim  the 
right  to  earn  large  dividends.  The  Commission 
has,  in  a  few  cases,  given  specific  suggestions  to 
companies  relative  to  extensive  improvements 
needed  in  their  plants,  —  suggestions  which  these 
companies  have  obeyed.  Again,  the  board  pre- 
scribes such  systematic  methods  of  bookkeeping 
and  classification  of  expenses  as  to  enable  the 
companies  themselves  often  to  realize  how  their 
business  is  being  conducted,  and  where  the  leaks 
are  located,  far  better  than  is  possible  in  the  ma- 
jority of  companies  in  other  States. 

While  the  Commission  has  done  admirable 
work  in  its  prevention  of  stock-watering  and  of 
the  formation  of  competing  companies  outside  of 
Boston,  and  has  perhaps  done  something  to  hasten 
the  decline  of  prices  of  gas,  yet  it  has  been  so 
timid  in  its  handling  of  the  larger  companies,  so 
secretive  in  its  locking  up  of  the  facts  it  gathers 
from  the  companies,  since  it  is  the  only  court  on 
record  that  keeps  secret  the  evidence  on  which 
it  acts,  and  has  produced  the  general  impression 
of  being  so  hostile  to  municipal  ownership,  that 


602  MUNICIPAL  MONOPOLIES. 

the  people  of  Massachusetts  do  not  consider  the 
-Commission  idea  more  than  a  half-way  measure. 
Many  more  cities  than  the  sixteen  mentioned  in 
the  chapters  on  electric  light  would  to-day  be 
owning  and  operating  both  gas  and  electric-light 
works,  were  it  not  for  the  law  on  the  subject, 
which  is  usually  so  executed  as  to  force  a  mu- 
nicipality under  such  circumstances  to  buy  out 
existing  private  plants  at  much  more  than  their 
structural  value. 

Philadelphia. 

The  lease  of  the  Philadelphia  Gas-Works  in 
1897  for  thirty  years,  after  fifty-six  years  of  public 
operation  and  sixty-two  years  of  public  owner- 
ship, has  been  widely  heralded  as  an  evidence  of 
failure  of  public  ownership.1  The  salient  facts, 
which  alone  can  be  here  given,  illustrate,  rather, 
the  extent  to  whicli  powerful  corporate  influences 
will  weaken  and  corrupt  government  for  their 
own  ends  when  the  people  are  asleep  and  the 
spoils  system  is  allowed  to  prevail. 

1  A  full  account  of  the  lease  will  be  found  in  an  article  by  the 
writer  in  The  Forum  for  March,  1898;  by  Professor  L.  S.  Rowe, 
in  The  Annals  of  The  American  Academy  for  May,  1898;  and  by 
Clinton  Rogers  Woodruff  in  The  American  Journal  of  Sociology 
for  March,  1898.  For  an  account  of  the  history  of  municipal  gas- 
works in  Philadelphia  and  other  American  cities,  reference  may 
also  be  made  to  the  following  by  the  writer:  "Municipal  Gas- 
Works  in  the  United  States,"  a  monograph  of  the  American 
Economic  Association  in  1891,  aud  an  article  in  The  Review  of 
Mevieivs  for  February,  1893. 


GAS.  603 

The  works  under  public  operation  would  have 
shown  better  results  than  were  obtained  had  it 
not  been  for  the  spoils  system,  general  ineffi- 
ciency, and  unprogressiveness.  There  had  been 
improvement  in  these  respects  since  direct  popular 
control  of  the  works  was  secured  in  1887,  but  not 
as  rapidly  as  at  first  seemed  likely.  The  respon- 
sibility for  this  of  course  rested  upon  the  whole 
community.  It  had  not  been  sufficiently  imbued 
with  the  spirit  of  municipal  reform,  which,  start- 
ing in  Great  Britain,  is  rapidly  sweeping  over 
America. 

The  masses  were  overwhelmingly  against  the 
lease,1  but  had  not  the  grit  to  take  the  leadership 
into  their  own  hands,  or  make  their  power  felt. 
The  ordinary  business  and  professional  man  was 
ignorant  of  civic  ideals,  lacking  in  civic  patriotism, 
and  saturated  with  the  out-of-date  and  dangerous 
philosophy  that  the  only  way  to  treat  an  ineffi- 
cient government  is  to  clip  its  wings,  instead  of  to 
strengthen  it  for  higher  and  nobler  flights. 

Another  social  class,  the  real  rulers  of  many 
of  our  cities,  formed  part  of  the  Philadelphia  situ- 


1  In  a  vote  taken  in  the  twenty-eighth  ward  of  the  city  by  the 
Inquirer,  with  ballot-boxes  and  regular  printed  ballots,  just  be- 
fore the  lease,  the  votes  in  its  favor  were  only  32,  and  against  it 
2,583,  or  1  to  81.  The  city  council  voted  down  a  referendum  prop- 
osition. The  Progressive  Age,  Jan.  15,  1898,  frankly  admitted 
that  the  people  would  have  voted  against  a  lease,  and  that  "  it 
was  artificial  pressure  which  effected  the  result." 


604  MUNICIPAL  MONOPOLIES. 

ation.  These  were  the  so-called  "  leading  citi- 
zens," who  obtained  their  title  by  their  pronounced 
success  in  leading  the  community  in  the  direction 
of  their  private  interests,  as  involved  in  valuable 
franchises.  Said  the  honorable  Wayne  MacVeagh, 
in  a  public  address  during  the  discussion  of  the 
lease,  "  Every  man  who  votes  for  this  ordinance 
will  go  through  the  rest  of  his  life  with  the  brand 
on  his  forehead,  '  Bribed  by  the  rich  to  rob  the 
poor.'  " 

The  United  Gas  Improvement  Company,  which 
for  ten  years  had  been  delivering  to  the  city's  gas- 
holders more  and  more  of  the  gas  sold,  and  which 
finally  secured  the  lease,  owns  the  gas-works  in 
over  thirty  cities,  including  Fall  River,  Jersey 
City,  Harrisburg,  Atlanta,  Minneapolis,  Sioux 
City,  Des  Moines,  and  Kansas  City.  It  was  com- 
monly charged  in  Philadelphia  with  exerting  an 
hypnotic  influence  over  the  city  councils,  so  as 
to  prevent  all  improvement  of  the  works.  The 
people,  by  an  immense  majority,  voted  $1,000,000 
to  improve  the  works  only  a  week  before  the 
lease  was  signed,  and  would  have  voted  far  more, 
and  would  have  done  so  }Tears  before,  if  the  coun- 
cils had  submitted  the  matter  to  them.1 

How  the  lease  was  finally  secured  is  thus  de- 

1  On  the  clay  the  people  voted  $1,000,000  to  improve  the  gas- 
works, they  voted  $11,300,000  for  the  building  of  schoolhouses, 
improvement  of  the  water-works,  etc. 


GAS.  605 

scribed  by  the  secretary  of  the  National  Municipal 
League  and  counsel  of  the  Municipal  League  of 
Philadelphia.1 

"  Surrounding  the  committee  rooms  and  council 
chambers  at  all  the  meetings  when  the  United  Gas 
Improvement  Company's  ordinance  was  under  con- 
sideration was  a  band  of  the  shrewdest  and  most 
skillful  lobbyists,  and  at  one  time  some  of  them 
had  the  audacity  to  enter  upon  the  floor  of  the 
councils,  and  direct  their  fight  for  the  ordinance 
from  that  point  of  vantage.  .  .  .  Yet  despite  the 
public  protests,  and  despite  the  public  indignation, 
and  despite  the  very  much  better  offers  of  com- 
peting companies,  the  United  Gas  Improvement 
Company,  controlled  as  it  is  by  those  who  have 
already  secured  the  street-railway,  electric-light- 
ing, and  gasoline  franchises  and  privileges,  was 
able  to  carry  the  day.  And  yet  there  are  some 
people  who  wonder  at  the  prevailing  discontent 
among  the  poorer  classes,  and  the  growth  of  that 
sentiment  for  which  Mr.  Bryan  stands." 

Philadelphia,  out  of  its  net  earnings,  had  paid 
for  its  works,  and  had  furnished  cheaper  gas  during 
nearly  all  of  its  history  than  had  the  private  works 
of  New  York,  Baltimore,  and  Washington.  In 
1894  the  Quaker  City  had  done  what  the  Standard 
Oil,  Gould,  and  Sage  interests  insisted  before  the 

1  Mr.  Clinton  Rogers  Woodruff,  member  of  the  Pennsylvania 
Legislature,  in  American  Journal  of  Sociology,  March,  1898. 


606  MUNICIPAL  MONOPOLIES. 

New  York  Legislature  in  1897  could  not  be  done 
without  ruin;  viz.,  reduced  the  price  of  gas  to  $1. 
The  works  continued  to  pay  operating  expenses 
and  depreciation  charges,  besides  furnishing  nearly 
700,000,000  feet  of  gas  to  the  city  yearly,  worth, 
at  even  75  cents,  $500,000,  or  fully  5  per  cent 
on  the  structural  value  of  the  plant.1 

As  a  result  of  the  surrender  of  her  gas-works, 
which  thus  even  in  1897  furnished  free  public  gas, 
and  paid  all  expenses  with  a  charge  to  private 
consumers  of  $1.00,  Philadelphia  has  secured  only 
90-cent  gas,  or  its  equivalent  in  a  cash  bonus,  for 
ten  years,  85-cent  gas  for  five  years  thereafter,  then 
gas  for  80  cents  for  another  five  years,  and  for  75 
cents  for  the  last  ten  years  of  the  lease.  Yet  with 
the  expenditure  of  $1,500,000,  as  the  director  of 
public  works  stated  in  May,  1896,  the  city  could 
have  reduced  its  price  at  once  to  75  cents,  to 
say  nothing  of  the  certainty  that  gas  could  be 
sold  much  lower  long  before  the  end  of  the  lease. 
The  lessees  also  are  to  furnish  free  as  much  gas 
for  city  use  as  is  now  so  consumed  ;  but  that  advan- 
tage the  city  already  enjoyed.  Finally  the  lessees 
agree  to  spend  $15,000,000  on  improvements  and 

1  In  1896  the  cash  profits  were  .$352,988. 80.  In  the  eleven  months 
of  1897,  preceding  the  lease,  they  were  $382,646.12.  Against  this 
should  be  balanced  $73,192.37,  the  cost  of  collections  borne  by 
other  departments  in  189(1,  water  worth  $11,576,  and  extra  ex- 
penses entailed  upon  the  auditors'  and  director's  office  of  about 
$11,000;  also  depreciation  charges  estimated  by  the  excellent 
authority,  Eugene  Vanderpool,  at  $276,500,  or  a  total  of  about 
$372,000. 


GAS.  607 

extensions  during  the  thirty  years ;  but  this  is  no 
more  than  the  ordinary  depreciation  charge  of  5 
to  7  cents  per  thousand  feet  on  the  yearly  output, 
which  the  city  met  in  1896  and  1897  out  of  its  net 
cash  receipts. 

Richmond,  V/ 

The  largest  and  oldest  public  plant  since  the 
lease  of  the  Philadelphia  works  is  at  Richmond,  Va., 
whose  population  in  1890  was  81,388.  There 
are  no  data  at  hand  relative  to  the  history  of 
the  plant  from  its  construction  by  the  city  in 
1852  until  1867.  At  that  time  the  plant  naturally 
showed  evidence  of  having  shared  in  the  general 
ruin  which  the  war  had  brought  upon  the  city, 
although  there  is  no  evidence  that  the  plant  had 
been  badly  managed  in  any  way.  During  the  next 
nineteen  years,  ending  in  1885,  the  plant  out  of 
its  net  earnings  not  only  paid  for  nearly  $500,000 
of  extensions,  but  if  the  gas  used  on  the  streets 
and  in  public  buildings  be  reckoned  at  the  same 
price  as  that  charged  to  private  consumers,  the 
plant  also  paid  the  entire  cost  of  the  works  up  to 
1867  of  about  1100,000.  The  plant  also  earned 
an  average  of  9.7  per  cent  a  year  on  that  capital 
charge  of  $400,000.  As  this  capital  at  the  close 
of  the  war  represented  property  that  had  disap- 
peared, and  as  it  was  paid  for  out  of  net  earnings 
several  years  before  1886,  the  percentage  of  profit 


608  MUNICIPAL   MONOPOLIES. 

on  any  actual  cash  investment  of  the  city  was 
much  over  10  per  cent.  The  price  of  gas  during 
this  period  gradually  fell  from  $3.00  to  $1.50. 

During  the  last  twelve  years,  ending  with  Dec.  31, 
1897,  the  price  of  gas  has  continued  to  fall,  being 
reduced  to  $1.25  per  thousand  feet  in  February, 
1891,  and  to  $1.00  in  1893.  During  this  period 
the  excess  of  receipts  above  operating  expenses 
has  been  sufficient  to  pay  for  all  the  new  construc- 
tion and  extensions  of  $154,775.40,  and  the  light- 
ing and  extinguishing  of  the  street-lamps  to  the 
amount  of  $30,203.78,  and  has  left  a  cash  balance 
of  $341,963.47.  If  to  this  be  added  the  value  of 
the  gas  used  on  the  streets  and  in  public  buildings, 
estimated  at  $1.25  per  thousand  feet,  or  about  the 
average  price  to  private  consumers,  the  direct  ben- 
efit to  the  city  may  be  computed  at  $877,399.67,  or 
•173,117  per  year.  This  is  18.7  per  cent  yearly  on 
the  structural  value  of  the  plant,  which  (with  over 
1,600  street-lamps)  could  be  duplicated  for  about 
$570,000,  or  $3.00  for  every  thousand  feet  of  out- 
put in  1897.  On  such  a  capital  the  excess  of  cash 
earnings  above  operating  expenses,  extensions,  and 
lighting  of  street-lamps  was  $67,065.01  in  1897. 
Estimating  the  11,287,700  feet  of  public  used  gas 
at  $1.00  per  thousand  feet,  the  price  to  private 
consumers,  the  net  profit  was  14.6  per  cent  on  the 
cost  of  duplicating  the  present  plant,  or  about  12 
per  cent  after  making  allowance  for  depreciation. 


GAS.  609 

In  1897,  with  coal  over  13.00  a  ton,  and  with  oil 
4  cents  a  gallon,  which  is  not  far  from  the  price 
in  New  York  and  Boston,  but  much  higher  than 
in  the  middle  West,  Richmond  put  gas  in  the 
holders  at  the  works  for  42  cents,  and  delivered  it 
at  the  burner  for  57  cents  per  thousand  feet,  aside 
from  any  allowance  for  depreciation,  or  such  ex- 
penses for  interest  and  taxes  as  private  companies 
have  to  pay.  The  Richmond  works  provided  for 
all  extensions  of  plant  and  new  construction  from 
1886  to  1897  by  an  average  expense  of  only  7.3 
cents  per  thousand  feet.  The  amount  of  gas  used 
in  the  burner  meantime  increased  from  148,609,730 
feet  to  190,737,980  feet  a  year.  The  plant,  with 
its  water-gas  addition,  was  undoubtedly  worth  more 
in  1897  than  in  1886.  An  allowance  of  7  cents  for 
depreciation  therefore  is  certainly  liberal.  Taxes 
in  Massachusetts  average  6  cents  per  thousand  feet, 
but  are  probably  lower  in  most  other  States.  The 
inclusion  of  these  two  items  would  raise  the  cost 
at  Richmond  only  to  70  cents.  Since  the  plant 
was  paid  for  fully  fifteen  years  ago  out  of  the  net 
receipts,  there  is  no  need  of  allowing  anything 
for  interest ;  but  if  it  should  be  added,  it  would 
mean  only  4  per  cent  of  the  $3.00  per  thousand 
feet  necessary  to  duplicate  the  plant,  and  would 
raise  the  cost  only  to  82  cents.  It  is  quite  likely 
that  certain  improvements  asked  for  by  the  super- 
intendent in  his  last  two  reports,  and  some  further 


610  MUNICIPAL  MONOPOLIES. 

use  of  labor-saving  machinery,  would  reduce  ex- 
penses 10  cents  per  thousand  feet;  but  the  results 
already  achieved  are  so  much  superior  to  what 
(•t her  cities  gain  under  private  ownership,  even 
where  the  magnitude  of  the  output  and  the  cost 
of  material  are  more  favorable  to  cheap  manufac- 
ture than  in  Richmond,  that  people  of  the  latter 
city  will  not  listen  to  propositions  for  the  sale  or 
lease  of  their  works. 

Mr.  John  H.  Knowles  was  superintendent  of 
the  works  from  1870  till  1886;  and  his  son,  who 
for  many  years  has  been  connected  with  the  plant, 
has  had  charge  since  June  1,  1895.  From  1886 
until  1895  the  works  were  in  charge  of  one  who 
had  been  assistant  superintendent  for  the  previous 
sixteen  years.  One  party  has  been  in  power  all  the 
time,  to  be  sure,  but  different  factions  were  at  the 
front  in  different  years  ;  no  one,  however,  thought 
of  changing  the  superintendent  for  political  reasons. 
Some  irregularities  and  possibly  dishonesty  were 
discovered  in  connection  with  the  works  in  1895, 
but  the  loss  at  most  was  only  a  few  thousand  dol- 
lars. The  present  management  is  very  progressive. 
By  a  wise  provision,  the  works  cannot  be  sold  with- 
out a  vote  of  the  people ;  but  there  is  no  evidence 
that  the  city  government  has  any  desire  to  take 
such  a  step.1 

1  In  this  chapter  use  has  been  made  of  the  very  valuable  re- 
port of  Superintendent  Knowles  to  the  City  Council  of  Richmond, 


GAS.  611 

Alexandria,  Va.,  with  a  population  in  1890  of  14,330, 
has  owned  its  gas-works  since  1853.  The  city  is  famous 
for  its  grass-grown  streets,  and  its  contrast  in  most  things 
progressive  with  Washington  across  the  Potomac,  or  even 
with  many  Virginia  cities. 

It  is  not  to  be  expected  under  these  circumstances  that 
public  gas-works  should  show  any  striking  financial  results. 
Up  to  May  31,  1897,  however,  the  works,  costing  $157,225, 
had  been  paid  for  from  receipts,  and  $171,340  in  cash  had 
been  turned  into  the  city  treasury  after  paying  for  all 
extensions,  and  furnishing  all  gas  needed  by  the  city.  In 
1897-1898  the  cost  of  the  20,683,500  feet  of  gas  consumed 
at  the  burner  was  76.1  cents,  aside  from  depreciation.  From 
the  difference  between  76  cents  and  $1.33,  the  charge  to 
private  consumers,  2,390,700  feet  of  gas  and  $6,000  in 
money  was  secured  by  the  city,  after  some  expenditures  for 
the  improvement  of  the  works.  These  results  may  be  com- 
pared with  the  refusal  of  the  vastly  better  situated  Wash- 
ington Gas  Company  to  reduce  its  price  below  $1.25,  until 
1896,  when  Congress  ordered  a  reduction  to  $1.10.  In  the 
large  suburb  of  Georgetown  the  price  is,  still  $1.35. 

About  forty  miles  south  of  Alexandria  is  Fredericks- 
burg, the  scene  of  the  famous  battle  of  the  Civil  War,  and 
possessed  in  1890  of  a  population  of  only  4,528.  When 
this  city  put  in  its  gas-works  in  1891,  the  people  were  pay- 
ing $3.00  per  thousand  feet  for  gas.  They  are  now  paying 
$1.50,  while  the  consumption  has  more  than  doubled.  The 
total  cost  to  the  city,  including  interest,  was  only  $1.33  in 
1896-1897,  and  will  naturally  continue  to  fall  with  increase 
of  consumption. 

in  April,  1897,  relative  to  the  previous  thirty  years  of  administra- 
tion, and  also  the  annual  reports  of  the  plant,  and  material 
gathered  hy  the  author  during  several  visits  to  this  and  the  other 
puhlic-owned  gas-plants  mentioned  in  the  chapter. 


012  MUNICIPAL   MONOPOLIES. 

About  one  hundred  miles  southwest  of  Alexandria  is 
Charlottesville  (with  a  population  in  1890  of  5,562),  the 
seat  of  the  famous  University  of  Virginia,  and  the  home  of 
Jefferson.  The  gas-works,  under  the  charge  of  the  same 
manager  that  has  had  control  since  the  beginning  of  city 
ownership  in  1876,  long  ago  repaid  the  city  for  all  capital 
costs,  and  are  now  selling  gas  for  SI. 00  per  thousand  feet, 
which  is  low  for  that  section  of  country.  The  total  operat- 
ing expenses,  renewals,  and  extensions  for  the  11,000,000 
feet  of  annual  output  are  usually  from  60  cents  to  80  cents 
per  thousand  feet,  leaving  a  large  profit  to  the  city.  In 
this  case,  as  in  many  others,  part  of  the  profit  is  absorbed 
by  the  city  in  the  shape  of  free  light  for  streets  and  public 
buildings. 

On  the  southern  border  of  Virginia,  over  one  hundred 
miles  southwest  of  Richmond,  lies  Danville,  the  great 
tobacco  market  of  that  section  of  country.  This  city, 
of  10,305  population  in  1890,  has  owmed  its  gas-works 
since  1876,  and  established  in  1885,  as  has  elsewhere 
been  noticed,  one  of  the  oldest  and  most  successful  elec- 
tric-light plants  in  .the  United  States.  Under  the  admi- 
rable management  of  the  city  engineer,  who  has  had  charge 
since  the  beginning  of  city  ownership,  this  gas-plant  has 
steadily  reduced  the  price  of  gas  and  the  cost  of  manufac- 
ture, while  it  has  also  paid  for  the  capital  cost.  In  1897, 
with  a  total  consumption  of  20,733,300  feet,  the  operating- 
expenses  were  69  cents.  In  none  of  these  Virginia  cities 
has  the  spoils  system  had  any  apparent  influence ;  and, 
save  perhaps  in  Alexandria,  progressiveness  is  everywhere 
apparent. 

Wheeling,  W.  Va.,  with  a  population  in  1890  of  35,013, 
is  famous  for  its  low7  charge  of  75  cents  per  thousand  feet. 
This  low  price  is  apparently  made  possible  by  the  cheap- 
ness of  coal,  but  it  is  doitbtful  if  private  ownership  would 


GAS.  613 

have  done  as  well  by  the  people.  The  plant  has  been 
under  public  ownership  since  1870,  and  has  been  paid  for 
out  of  the  net  receipts.  The  operating  expenses  are  usually 
from  45  cents  to  52  cents  per  thousand  feet  for  the  approx- 
imately 100,000,000  feet  of  sales.  The  excellent  public 
street  electric-lighting  plant,  constructed  in  part  from  the 
net  earnings  of  the  gas  department,  has  admirably  supple- 
mented the  gas-works. 

The  latter  department  has  not  been  entirely  free  from 
inefficient  management.  Improvements  have  not  been 
introduced  as  fast  as  they  should  be ;  and  many  would 
criticise  the  wages  paid,  which  are  very  much  higher  than 
in  neighboring  private  works.  There  is  good  reason  for 
liberality  in  this  matter  in  the  case  of  public  works,  but  it 
is  thought  by  some  good  judges  in  Wheeling  that  it  has 
been  carried  too  far. 

While  it  is  easy,  therefore,  to  point  out  some  weak- 
nesses in  Wheeling,  the  results  on  the  whole  seem  to 
fully  justify  the  almost  unanimous  belief  in  public  owner- 
ship and  operation  which  has  always  appeared  to  exist 
there  and  in  other  cities  owning  their  gas-plants. 

Belief bntaine,  Ohio,  with  a  population  of  4,238  in  1890, 
built  its  plant  in  1873.  Like  most  Virginia  cities,  it  has 
had  great  success  with  city  ownership.  About  one-half  of 
its  gas  is  sold  for  fuel  purposes  for  about  50  cents  per 
thousand  feet,  and  the  other  half  for  illuminating  purposes 
at  $1.25  per  thousand  feet.  The  operating  expenses  of  the 
16,371,751  feet  that  were  consumed  from  March  18, 1896,  to 
March  18,  1897,  were  59  cents  per  thousand  feet  for  excel- 
lent 24  c.  p.  water-gas.  The  cost  has  been  less  since  then. 
As  the  plant  has  been  paid  for,  there  is  of  course  no  need 
of  earning  interest. 

Hamilton,  Ohio,  with  a  population  in  1890  of  17,565,  is 
the  only  city  that  has  attempted  competition  with  a  private 


614  MUNICIPAL  MONOPOLIES. 

company  instead  of  buying  it.  The  old  company  was 
charging  82.00  per  thousand  feet,  and  refused  to  reduce  the 
price  or  to  sell  the  plant  for  what  the  city  considered  a 
reasonable  price.  After  much  litigation  in  the  courts,  the 
city  erected  its  own  plant,  and  is  now  selling  gas  for  fuel 
and  illuminating  purposes  for  80  cents  per  thousand  feet. 
The  private  plant  has  reduced  to  about  the  same  point. 

The  city  plant,  in  the  twelve  months  ending  Nov.  30, 
1897,  delivered  at  the  burner  about  37,500,000  feet  of  mixed 
coal  and  oil  gas  at  a  cost  of  43  cents  per  thousand  feet.  If 
to  that  be  added  5  per  cent  interest  on  the  $200,000  cost 
of  the  plant,  the  total  cost  would  be  raised  to  69.7  cents. 
An  allowance  of  7  cents  for  depreciation,  which  has  been 
found  ample  in  Richmond,  as  already  seen,  would  raise  the 
cost  further  to  77  cents.  A  private  company  would  also 
have  to  pay  from  3  to  6  cents  for  taxes.1 

The  city  seems  to  have  made  a  poor  selection  of  an  oil- 
gas  plant,  as  a  supplement  to  its  coal-gas,  and  is  now 
increasing  its  proportion  of  coal-gas.  It  always  pays  to  put 
in  the  best  process  obtainable.  The  plant  seems  to  have 
been  largely  free  from  political  influence,  and  very  satis- 
factory to  the  people ;  but  many  complications  would  have 
been  avoided  if  the  city  could  have  bought  the  private 
plant.  It  is  believed  by  the  present  city  officials  that  pri- 
vate gas  companies  elsewhere  are  aiding  the  local  company 
to  keep  up  its  fight  with  the  city  in  the  hope  of  discredit- 
ing the  experiment.  This  private  company,  which  claimed 
in  1890  that  it  could  not  sell  below  82,  is  now  charging 
only  75  cents. 

1  The  total  cost  of  the  plant  is  only  $5.33  per  thousand  feet  of 
annual  consumption,  and  would  have  heen  less  had  the  plant 
continued  to  supply  streets  and  public  buildings,  which  it  could 
have  done  without  any  increase  of  plant.  The  city  does  this  now 
with  its  public  electric-light  plant. 


GA84  615 

Toledo,  Ohio,  with  a  population  of  81,434  in  1890,  had 
a  most  remarkable  experience  in  establishing  its  own  nat- 
ural-gas plant  in  1889-1890,  as  described  in  Mr.  Lloyd's 
"Wealth  vs.  Commonwealth,"  chapters  xxii.-xxvi.  The  trus- 
tees report  that  the  opposition  of  the  Standard  Oil  Com- 
pany so  embarrassed  the  sale  of  the  bonds,  and  so  increased 
the  price  of  oil  territory,  that  the  city  was  forced  to  pay 
$500,000  more  than  would  otherwise  have  been  necessary 
for  the  construction  of  its  plant,  and  lost  $500,000  more  in 
revenue. 

Only  41  per  cent  of  the  expenses  of  the  plant  have  been 
for  operation  since  1891.  The  other  59  per  cent  have  been 
for  the  purchase  of  oil-wells,  the  laying  of  mains,  and  the 
building  of  a  pumping-station.  Owing  to  the  rapid  ex- 
haustion of  natural  gas,  whether  under  private  or  public 
operation,  the  city  has  only  been  able  to  pay,  out  of  its 
receipts,  its  operating  expenses  and  new  construction  and 
extensions,  together  with  $100,000  toward  the  principal. 
There  remains  a  debt  of  $1,050,000,  which,  however,  wrould 
not  have  existed,  as  already  indicated,  if  the  city  had  been 
able  to  proceed  without  interruption  from  monopolistic 
interests.  The  plant  has  not  paid  interest  on  the  invest- 
ment, but  has  given  the  people  an  advantage  worth  all  the 
plant  has  cost,  and  much  more,  in  keeping  down  the  cost 
of  fuel.  The  city  plant  charged  only  8  cents  per  thousand 
feet  in  1891,  15  cents  in  1892,  and  has  charged  20  cents 
since  1894  per  thousand  feet.  The  private  plant  has  not 
ventured  to  charge  much  more,  although  it  raised  its  rates 
Sept.  1,  1898,  to  30  cents. 

Mayor  Jones  is  now  urging  the  construction  by  the  city 
of  a  good  water-gas  plant  to  supplement  the  natural  gas. 
This  supplementing  of  natural  gas  has  been  tried  for 
several  years  in  Louisville,  Ky.,  by  the  Kentucky  Heating 
Company ;    and  the  mixed  product    has  been   sold    for  a 


616  MUNICIPAL   MONOPOLIES. 

good  profit  for  35  cents  per  thousand  feet.  Water-gas  of 
24  c.  p.  is  put  into  the  holders  in  Chicago  for  20  cents 
per  thousand  feet  by  a  private  company,  and  equally  good 
offers  have  been  made  to  the  city  of  Toledo  by  the  owners 
of  a  good  gas  process.  The  cost  of  distribution  in  1892  in 
Toledo,  when  the  output  was  about  1,500,000,000  feet,  was 
under  2  cents  per  thousand  feet.  In  1897  the  cost,  with 
estimated  sales  of  272,000,000  feet  and  1,100  consumers, 
was  5.5  cents.  The  city  of  Toledo  ought  certainly  to  follow 
Mayor  Jones's  suggestions  at  the  earliest  possible  moment, 
or  there  will  be  a  lease  of  the  works,  as  in  Philadelphia. 

In  Kentucky  the  city  of  Louisville  owns  $925,000  of  the 
S3, 600, 000  of  stock  of  its  gas  company.  The  city  has  thus 
had  an  interest  in  the  company  ever  since  its  start  sixty  years 
ago.  The  price  of  gas  for  illuminating  purposes  is  SI. 30, 
and  for  fuel  purposes  75  cents.  As  there  are  $ 500,000  of 
bonds,  the  total  capitalization  is  over  $  10.00  per  thousand 
feet  for  the  nearly  400,000,000  feet  of  annual  consumption 
in  1897.  This  is  probably  three  times  the  cost  of  duplicat- 
ing such  a  large  plant ;  but  the  city  has  not  had  control  of 
the  management,  as  it  has  never  owned  a  majority  of  the 
stock,  save  early  in  1870.  For  a  short  time  then  the  city 
chanced  to  have  a  majority  of  the  stock,  through  its  pay- 
ment for  extensions ;  but  instead  of  using  the  chance  to  get 
control  of  the  management  and  making  further  extensions 
from  bond  sales,  it  permitted  the  private  owners  to  have  more 
stock  in  return  for  some  further  payments  for  extensions. 

The  only  city  in  Kentucky  which  operates  its  gas-plant 
is  Henderson,  a  great  tobacco  market  on  the  Ohio  Kiver, 
with  a  population  in  1890  of  8,835.  The  city  bought  the 
plant  in  1866  on  the  failure  of  a  private  company,  and 
leased  it  until  1882.  Since  then  it  has  directly  operated 
the  plant  with  general  satisfaction,  so  far  as  can  be  learned 
on  several  visits  of  the  writer  to  the  city. 


GAS.  617 

In  1897  the  plant  made  14,000,000  feet  of  gas,  and  had 
9  per  cent  leakage.  The  cost  of  the  remaining  12,800,000 
feet  of  one-third  water-gas  and  two-thirds  coal-gas  was  74 
cents  per  thousand  feet,  aside  from  depreciation  and  inter- 
est charges.  The  plant  was  long  ago  paid  for  out  of  the 
net  earnings,  save  for  some  extensions  and  improvements 
recently  made.  The  price,  which  had  been  $1 .50  up  to  1891, 
was  $1.25  from  then  until  1894,  and  since  then  has  been 
$1.00.  Few  changes  have  ever  occurred  in  the  manage- 
ment. For  more  than  ten  years  after  city  operation  began, 
the  superintendent  was  retained  who  had  had  charge  under 
private  operation. 

In  Massachusetts  the  interest  in  public  operation  of  light- 
ing-plants has  been  greater  than  in  most  States,  but  in  the 
case  of  gas  has  hitherto  been  kept  in  check  by  legal  re- 
strictions. A  city  or  town  entering  upon  such  ownership 
must  buy  out  the  existing  plant  if  the  latter  asks  for  it,  and 
at  a  price  fixed  by  a  board  of  arbitration  under  the  control 
of  the  courts.  Until  very  lately,  but  not  so  clearly  now,  the 
law  has  seemed  to  require  such  arbitrators  to  value  not  only 
the  tangible  assets,  but  the  franchise.  It  is  also  necessary 
for  each  branch  of  the  city  council  to  approve  of  public 
ownership  for  two  successive  years  by  a  two-thirds  vote,  be- 
fore it  can  be  submitted  to  popular  vote.  The  mayor  also 
may  veto  the  vote  of  the  council  in  either  one  of  these  two 
years,  in  which  case  the  proposition  for  city  ownership 
must  be  again  passed  by  a  two-thirds  vote,  through  both 
branches  of  the  council,  although  this  can  be  done,  of 
course,  immediately  after  the  veto.  In  case  the  people  vote 
against  city  ownership,  at  any  annual  municipal  election,  no 
similar  vote  can  be  submitted  until  the  expiration  of  three 
years  thereafter.  Such  restrictions  upon  popular  suffrage 
are  of  course  beyond  reason.  Yet  two  towns,  Wakefield 
and  Middleborough,  entered  upon  city  ownership  and  oper- 


618  MUNICIPAL   MONOPOLIES. 

ation  in  1894 ;  and  a  third,  Holyoke,  has  voted  to  do  so,  and 
in  the  fall  of  1898  was  arranging  the  details  of  purchase^ 
while  Westfield,  Mass.,  has  voted  to  follow  Holy  oke's  example. 

In  Wakefield,  with  a  population  in  1895  of  8,304,  the 
average  price  of  coal-gas  in  1897  was  $1.75  for  the  small 
consumption  of  6,525,000  feet.  The  operating  expenses  are 
about  $1.00.  The  difference  between  that  and  the  selling- 
price  is  equal  to  about  6^  per  cent  on  the  cost  of  the  plant. 
If  the  price  had  been  kept  at  $2.19,  which  was  charged  by 
the  private  company  in  1893,  the  city  would  more  than 
cover  the  high  depreciation  of  5  per  cent  on  the  cost  of  the 
plant,  which  is  counted  as  part  of  the  expenses  by  the  Mas- 
sachusetts Gas  Commissions.  Even  at  the  price  charged,  the 
city,  despite  its  small  size  and  the  high  price  of  coal  and  oil 
in  Massachusetts,  is  earning  an  ample  amount  to  cover  in- 
terest at  5  per  cent  and  an  ample  allowance  for  depreciation 
on  a  new  plant.  However,  the  city  was  forced  to  pay  the 
old  company  much  more  than  those  now  in  charge  believe 
the  plant  was  worth.  A  gas-plant,  for  an  output  of  even  as 
small  an  amount  as  0,000,000  feet  a  year,  can  be  built  for 
much  less  than  $11.37  per  thousand  feet,  which  is  the  present 
nominal  value  of  the  Wakefield  plant,  based  on  the  price 
paid  for  it  in  1894.  The  private  company,  even  at  a  much 
higher  charge  for  gas,  and  though  supplying  some  neighbor- 
ing towns  not  supplied  by  the  city  plant,  was  not  a  success 
financially ;  and  the  city  seems  on  the  whole  to  be  doing 
much  better  than  did  the  private  company.  The  works 
have  much  improved,  and  as  soon  as  the  capital  account 
can  be  reduced  to  a  reasonable  figure  the  works  will  show 
good  results. 

With  respect  to  Middleborough,  with  a  population  of 
6,689  in  1895,  there  are  few  facts  at  hand.  The  report 
for  1897-1S98,  however,  shows  that  the  income  exceeded 
operating  expenses  about  15  per  cent,  although  this  is  not 


GAS.  619 

enough  to  cover  interest  and  depreciation  on  the  cost  of 
the  plant,  which  seems  to  have  been  excessive  for  the  same 
reasons  that  effected  the  Wakefield  plant.  The  output  is 
very  small,  being  only  about  3,500,000  feet.  The  latest 
word  from  the  management  of  the  plant  indicates  extensive 
improvements  during  the  past  year,  1898,  and  general 
satisfaction  with  city  ownership.  Political  influences  do 
not  appear  to  enter  into  the  management  of  these  small 
Massachusetts  plants. 

In  the  summer  of  1898  the  city  of  Duluth,  Minn.,  with 
a  population  in  1890  of  33,115,  entered  upon  city  owner- 
ship and  operation  of  its  water  and  gas  works,  paying 
for  both  plants  $1,250,000.  It  was  the  estimate  of  the 
engineers  that  the  two  plants  could  be  duplicated  for  less 
than  $1,000,000,  but  it  was  thought  wise  to  pay  the- 
amount  indicated  in  order  to  get  rid  of  private  ownership. 
Extensive  improvements  have  been  made,  and  the  price  of 
gas  is  to  be  immediately  reduced  from  the  present  charge 
of  $2.00. 

Of  these  twelve  cities  now  operating  their  gas- 
works, all  but  four  — ■  Richmond,  Fredericksburg, 
Charlottesville,  and  Duluth  —  also  own  and  oper- 
ate electric-light  plants,  and  with  regard  to  the 
gas-works  the  following  conclusions  may  be  safely 
drawn :  — 

1.  That  the  people  believe  they  have  gained 
through  public  ownership  and  operation,  and 
wish  to  continue  it. 

2.  That  political  influence  is  not  seriously 
handicapping  any,  with  the  possible  exception  of 
Wheeling. 


620  MUNICIPAL  MONOPOLIES. 

3.  That  progressiveness  is  characteristic  of  all 
plants  save  Alexandria. 

4.  That  the  influence  of  the  spoils  system  in 
some  cities  does  not  appear  to  have  anything  like 
the  demoralizing  influence  on  the  city  govern- 
ment that  is  produced  by  the  efforts  of  private 
companies  elsewhere  to  secure  valuable  franchises. 

5.  That  it  is  possible  to  find  some  private 
plants  that  are  managed  more  economically  than 
some  of  these  public  plants,  but  it  is  doubtful 
if  the  average  in  private  plants  of  the  same  size 
is  superior.  In  the  Thirteenth  Annual  Report  of 
the  Kansas  Bureau  of  Labor  and  Industrial  Statis- 
tics for  1897,  a  condition  of  inefficiency  in  private 
gas-plants  of  that  State  is  shown,  that  is  worse 
than  has  been  discovered  in  any  of  the  public 
plants.  One  large  plant,  for  example  (Report, 
p.  93),  admits  to  the  bureau  a  loss  by  leakage 
and  condensation  of  25  per  cent  of  its  output  of 
42,000,000  feet.  Another,  with  5,156,820  feet, 
reports  a  loss  of  21.2  per  cent;  while  one  private 
plant  does  not  keep  any  account  of  leakage,  and 
another  has  no  station  meter  to  determine  the 
amount  of  gas  made  at  the  works. 

6.  Whether  or  not  the  management  from  an 
engineering  point  of  view  in  these  public  plants 
is  better  than  the  average  of  the  private  plants, 
there  is  abundant  evidence  that  the  consumer  and 
the    tax-payer    are    better    treated    under   public 


GAS.  621 

operation  than  under  private  operation  in  cities 
of  substantially  the  same  size  and  situated  in  the 
same  section  of  country. 

Great  Britain. 

Municipal  ownership  and  operation  of  gas-works 
in  Great  Britain  has  developed  less  rapidly  than 
in  the  case  of  electric  light  and  power,  not  only 
because  of  the  great  expectations  from  the  new 
system  of  lighting  and  its  special  appropriateness 
for  street  illumination,  but  because  gas  legislation 
being  much  older  than  that  of  electric  light,  Eng- 
lish legislators  did  not  guard  the  rights  of  the  peo- 
ple as  carefully  in  the  case  of  the  former  as  of  the 
latter.  Electric-light  franchises  or  permits  from 
the  local  government  board  are  always  for  twenty- 
one  or  forty-two  years.  At  the  end  of  that  time 
cities  may  purchase  on  payment  of  the  structural 
value. 

In  the  case  of  the  gas  companies,  there  has 
usually  been  no  restriction  of  time.  Hence,  in  case 
of  public  purchase,  cities  have  to  pay  for  the  cap- 
italization of  the  earning  power. 

Gas-works  also  were  established  in  most  places 
before  the  modern  spirit  of  municipalization  had 
been  aroused ;  and  therefore  city  ownership  of  gas- 
works must  come  almost  entirely  through  purchase 
of  existing  plants,  rather  than  through  the  erection 


022  MUNICIPAL  MONOPOLIES. 

of  the  first  plant  of  its  kind  in  the  place,  as  in  the 
case  of  electric  light. 

The  Local  Government  Board  regulates  the  pri- 
vate companies  in  the  matter  of  stock-watering  as 
rigidly  as  it  does  in  Massachusetts ;  and  while  com- 
panies are  allowed  to  declare  average  dividends  of 
10  per  cent  on  certain  of  their  older  paid-up  capital, 
on  all  new  issues  of  stock  of  recent  years  they  are 
only  allowed  to  declare  7  per  cent,  and  on  bonds 
6  per  cent,  while  the  new  capital,  since  1887,  must 
always  be  sold  at  auction.  This  is  more  rigid  than 
the  Massachusetts  provision,  which  allows  the  Gas 
and  Electric  Light  Commission  to  fix  the  premium. 
The  Commission,  as  in  the  case  of  street  railways, 
is  said  to  fix  the  premium  below  the  market  value, 
thus  allowing  some  unnecessary  increase  in  capital. 
In  Great  Britain  it  is  customary  for  the  Local 
Government  Board  to  fix  a  sliding-scale,  allowing 
the  companies'  dividend  to  be  raised  by  1  per  cent 
for  every  reduction  of  2  cents  in  the  price  of  gas, 
and  vice  versa.  Another  system  is  to  permit  the 
price  to  fluctuate  between  the  maximum  and  the 
minimum, — say,  between  70  and  80  cents,  —  and 
then  apply  the  regulation  of  dividends  to  prices 
above  and  below  that.  Municipalities  then  test 
gas-meters  and  examine  gas,  which  must  be  of  a 
certain  standard,  and  can  obtain  authority  from  the 
Local  Government  Board  to  purchase  gas  under- 
takings, unless   the  company  supplies  several  dis- 


gas.  623 

tricts,  in  which  case  the  leave  of  Parliament  must 
be  obtained. 

The  proportion  of  gas  sold  by  municipalities  grew 
from  31.7  per  cent  of  the  total  in  1882  to  36.9  per 
cent  in  1897,  and  the  number  of  companies  from 
118,  or  29.6  per  cent,  to  208,  or  32.45  per  cent  of 
the  total,  in  1897.  Outside  of  London  one-half 
of  the  gas  supplied  is  by  municipalities,  and  the 
latter  reach  one-half  of  the  gas  consumers  of  the 
United  Kingdom.  From  their  lower  prices  it 
results  that  the  average  consumption  outside  of 
street-lights  by  the  1,106,456  patrons  of  public 
companies,  averaged  about  27,488  feet  in  1896- 
1897,  and  the  consumption  of  1,439,272  patrons 
of  the  private  companies  averaged  46,266  feet.  Di- 
vide the  total  receipts  and  expenditures  of  $ie  pub- 
lic companies  and  the  private  companies  by  the  total 
consumption  of  each,  and  it  appears  that  the  aver- 
age receipts  in  the  private  companies  were  86 
cents,  and  the  average  expenses  63  cents,  leaving 
a  profit  of  23  cents  per  thousand  ;  and  in  the  case 
of  the  public  plants  the  average  receipts  were  74.96 
cents,  and  the  average  expenses  were  56.3  cents, 
leaving  a  profit  of  18.36  cents.  Although  the  re- 
ceipts in  both  cases  include  receipts  from  residuals 
as  well  as  from  gas,  it  is  certain  that  the  average  price 
in  the  private  companies  is  fully  10  cents  per  thou- 
sand feet  higher  than  in  the  public  companies.  Yet 
the  latter  are  required  by  law  to  earn  enough  to 


624  MUNICIPAL  MONOPOLIES. 

pay  interest  on  all  outstanding  obligations,  and  ac- 
cumulate a  sinking-fund  to  pay  off  the  entire  debt 
in  from  thirty  to  fifty  years.  The  public  companies 
average  sales  of  207,370,000  feet,  and  the  private 
companies  170,325,000  feet.  The  public  companies, 
however,  were  at  a  greater  expense  in  one  respect 
for  the  sale  of  their  gas,  because  the}^  had  to  deal 
with  a  larger  number  of  consumers  per  million  feet 
of  output.  The  total  capital  that  has  been  raised 
or  borrowed  in  the  public  companies  averaged  |2.99 
per  thousand  feet  of  annual  output,  and  in  the  case 
of  the  private  companies  $3.27.  Much  of  the 
public  capital,  moreover,  has  been  counterbalanced 
by  sinking-fund  accumulations. 

A  very  valuable  yearly  statement  in  classified 
form  of  the  accounts  of  the  leading  gas  companies 
is  published  yearly  by  John  W.  Field.1  Mr.  Field 
groups  together  eight  public  plants,  —  Birming- 
ham, Bolton,  Carlisle,  Leicester,  Manchester,  Not- 
tingham, Oldham,  and  Salford,  —  and  ten  private 
plants,  —  Bath,  Brighton,  Bristol,  Derby,  Liver- 
pool, Newcastle-on-Tyne,  Plymouth,  Portsea,  Roch- 
ester, and  Sheffield.  In  1897  these  eight  public 
companies  sold  15,096,679,000  feet  of  gas,  with  an 
original  capital  of  $2.06  per  thousand  feet,  less  57 
cents  paid  off  or  in  the  sinking-fund ;  i.e.,  with  a 
net  capital  of  $1.49.     The  ten  private  companies 

1  Eden  Fisher  &  Co.,  7  Clements  Lane,  Lombard  Street,  E.  C, 
publisher.     Price,  15  shillings. 


.     GAS.  625 

sold  12,905,402,000  feet  with  a  net  outstanding 
capital  of  $2.64  per  thousand  feet  of  annual  output. 
This  gradual  reduction  of  original  capitalization 
without  higher  charges  than  those  of  private  com- 
panies will  enable  the  public  companies  in  time  to 
dispense  with  all  capital  charges.  The  average 
"capital  employed" — apparently  the  structural 
value  —  was  $2.60  and  $2.46  in  the  case  of  the 
public  and  private  companies  respectively.  The 
average  prices  in  these  two  groups  have  been  about 
the  same  for  the  last  few  years.  The  price  of  the 
private  plants  has  usually  been  a  little  higher.  In 
1897  it  was  nine-tenths  of  a  cent  lower,  being 
54.18  cents  per  thousand  feet,  as  contrasted  with 
an  average  of  55.04  cents  in  the  case  of  the  public 
companies. 

For  convenience  in  these  computations  the 
English  penny  is  reckoned  as  two  cents.  To  be 
precise,  however,  the  private  and  public  charges 
averaged  respectively  55.07  cents  and  55.95  cents. 
To  counterbalance  this  slightly  higher  charge  the 
public  plants  paid  44  cents  more  taxes,  and  after 
paying  interest,  depreciation,  and  sinking-fund 
charges,  turned  into  the  city  treasury  6  cents  of 
profit,  instead  of  distributing  dividends  to  stock- 
holders. 

The  total  operating  expenses  and  taxes  were 
39.6  cents  for  the  private  companies,  and  38.66 
cents  for  the  public  companies.     The  cost  in  the 


620  MUNICIPAL  MONOPOLIES. 

holder  was  29.96  cents  for  the  private  companies, 
and  29.46  for  the  public.  The  distributing  ex- 
penses, aside  from  taxes,  were  7.12  cents  per 
thousand  feet  for  the  private  companies,  and  6.24 
cents  for  the  public  companies. 

From  personal  correspondence  it  is  learned  that 
the  stokers,  or  retort-men,  average  $1.35  a  day  in 
Belfast,  $1.22  in  Manchester,  $  1.26  in  Birming- 
ham, and  $1.35  in  Glasgow,  in  all  cases  for  eight 
hours ;  while  the  Report  of  the  United  States  Sen- 
ate Finance  Committee  (The  Aldrich  Report)  and 
other  accessible  data  show  that  the  average  wages 
in  America  are  about  $2.18  for  twelve  hours' 
labor. 

With  regard  to  more  unskilled  labor,  such  as 
coal  and  coke  handlers  and  laborers  at  the  works, 
the  wages  in  these  English  cities  for  eight  hours 
are  from  62  cents  in  Belfast  to  78  cents  in  Glas- 
gow; while  in  America,  for  from  ten  to  twelve 
hours,  the  wages  are  about  $1.50  to  $1.75.  If 
these  wages  be  all  reduced  to  a  common  day  of 
ten  or  twelve  hours,  it  will  be  seen  that  Ameri- 
can wages  are  about  25  to  30  per  cent  higher  than 
those  of  Great  Britain.  In  the  case,  however,  of 
those  employed  in  the  distributing  system,  such 
as  bookkeepers,  collectors,  etc.,  the  difference  is 
less.  The  average  wages  for  the  entire  plant  are 
not  over  25  per  cent  higher  in  America. 

The  cost  of  gas  in  the  holder  in  America  for 


gas.  627 

plants  of  as  large  an  output  as  these  eighteen 
English  plants  is  usually  less  than  the  29  to  30 
cents  just  quoted  from  England,  despite  the  differ- 
ence in  wages,  because  of  the  lower  cost  of  oil 
and  coal  in  America.  The  cost  of  pipe,  coal-gas 
retorts,  water-gas  apparatus,  lumber  for  buildings, 
land,  etc.,  is  as  low  as  in  England,  if  not  lower. 
A  large  contract  for  water-pipe  in  Hastings  and 
another  British  city  has  just  been  awarded  to 
Messrs.  II.  D.  Wood  &  Co.  of  Philadelphia,  the 
lowest  bidders,  and  gas-pipe  costs  about  the  same 
as  water-pipe. 

Neither,  then,  in  the  cost  of  construction  nor 
the  cost  of  gas  in  the  holder,  is  there  any  reason 
for  the  expense  being  greater  in  America  than  in 
Europe.  If  we  assume  that  the  cost  of  distribu- 
tion of,  say,  7  cents,  aside  from  taxes,  of  these  large 
English  cities  to  be  increased  one-fourth,  and 
American  taxes  of  even  6  cents  added,  there  would 
still  remain  a  total  cost  of  distribution  of  only  15 
cents  to  add  to  a  cost  in  the  holder  of  20  to  30 
cents.  There  is  no  reason  why,  with  as  wise  grant- 
ing of  franchises  or  as  economical  public  manage- 
ment as  in  English  cities,  gas  in  cities  of  the  same 
size  should  not  be  as  low,  within  at  least  5  cents 
per  thousand  feet,  in  America  as  in  Great  Britain. 

According  to  Brown's  "  Directory  of  American 
Gas  Companies,"  the  total  consumption  of  gas  in 
this  country  was  only  about  51,500,000,000  feet 


628  MUNICIPAL  MONOPOLIES. 

in  1893.  The  consumption  in  Great  Britain,  with 
half  the  population,  was  101,886,371,130.  There 
is  surely  a  close  connection  between  the  fact  that 
the  English  consume  four  times  as  much  gas  per 
capita  as  do  we,  and  the  other  fact  that  gas  is  sold 
for  less  than  75  cents  per  thousand  feet  on  the 
average,  or  only  at  about  half  of  current  American 
prices.  These  lower  prices,  with  the  great  social 
as  well  as  financial  benefits  resulting  therefrom  in 
the  saving  of  labor  from  the  substitution  of  gas  for 
coal  and  oil,  are  not  due  to  any  great  difference  in 
the  cost  of  placing  gas  in  the  burner  in  the  two 
countries.  Rather  is  the  lower  price  and  more 
extensive  use  of  gas  abroad  due  to  the  public  con- 
trol of  private  management,  and  to  the  prospect  of 
city  ownership  ever  impending  over  the  English 
private  companies,  if  they  do  not  fairly  approach 
the  record  of  the  public-owned  companies. 


IX. 
REGULATION  OR  OWNERSHIP? 


REGULATION  OR  OWNERSHIP? 

By  EDWARD   W.   BEMIS. 


From  what  has  gone  before,  it  is  evident  that 
there  must  be  either  strict  regulation  or  public 
ownership,  with  or  without  public  operation,  of 
city  monopolies.  It  is  proposed  in  this  closing 
chapter  to  discuss,  with  the  brevity  that  the  space 
at  command  compels,  the  methods  of  regulation 
where  that  form  of  control  is  preferred,  and  the 
arguments  for  and  against  public  ownership  and 
operation,  together  with  the  methods  of  bringing 
about  and  conducting  public  operation  if  such  op- 
eration is  desired. 

It  must  be  remarked  in  the  first  place,  however, 
that  public  education  and  a  courageous  leadership 
by  public  spirited  men  are  fundamental  to  the 
success  of  either  regulation  or  public  ownership. 
Little  can  be  done  where  conditions  are  such  as 
existed  in  Minneapolis  in  1894.  At  that  time  an 
outside  electric  company  offered  to  erect  a  plant 
of  a  thousand  electric  lights  for  Minneapolis,  and 
sell  it  to  the  city  for  one  dollar  at  the  end  of  five 
631 


632  MUNICIPAL   MONOPOLIES. 

years,  if,  meantime,  it  might  receive  $150  a  year 
per  light,  which  was  the  price  the  old  company 
was  getting.  It  was  found  by  the  city  engineer, 
after  a  careful  investigation,  that  the  new  com- 
pany could  afford  to  make  this  proposition.  But 
such  was  the  influence  of  the  old  company  on  the 
press  and  council,  and  such  the  ignorance  of  the 
public,  that  the  contract  with  the  old  company 
was  renewed  for  five  years  at  the  old  price  of 
$150. 

City  councils  should  follow  the  example  of  the 
one  in  Ithaca,  New  York,  which,  in  February,  1898, 
appropriated  money  to  buy  $25  worth  of  books  on 
municipal  questions  for  the  use  of  the  councils ; 
and,  on  the  request  of  members  or  of  city  officials, 
money  was  also  appropriated  for  periodicals  along 
the  same  line.  The  world  is  moving  so  rapidly  in 
the  solution  of  municipal  questions,  and  corporate 
greed  is  so  eagerly  pouncing  upon  city  govern- 
ments before  it  is  too  late  in  order  to  seize  what 
privileges  are  left,  that  the  people  and  their  officers 
must  exercise  constant  vigilance,  and  keep  abreast 
of  what  is  going  on  throughout  the  country,  if  they 
would  not  see  their  municipal  birthright  given 
away. 

Every  city  charter  and  State  law  on  these  mu- 
nicipal monopolies  should  provide  the  following 
methods  of  regulation : 

1.  The  terms  of  a  proposed  franchise  should  be 


REGULATION   OR   OWNERSHIP  f  633 

published  at  least  one  month  before  a  grant  is 
made  in  order  to  admit  of  public  discussion.  And 
there  should  be  a  provision  for  a  popular  vote  on 
the  granting  of  new  franchises  or  the  renewal  of 
old  ones,  and  on  the  purchase  and  operation  by 
the  people  of  an  existing  monopoly,  whether  its 
franchise  has  expired  or  not. 

The  proposed  new  charter  for  Minneapolis  *  pro- 
vided that  no  city  franchise  should  be  granted  "  un- 
less the  question  of  granting  the  same  shall  be  first 
submitted  to  the  qualified  voters  of  such  city,  and 
adopted  by  a  majority  voting  at  such  election  on 
the  question;"  and  it  provided  further  for  a  vote 
of  the  people  upon  acquiring  or  constructing  a 
plant  for  any  of  the  public  purposes  usually  per- 
formed or  undertakings  known  as  city  monop- 
olies. The  city  council  was  to  decide  whether  to 
submit  such  propositions  to  the  public.  No  mu- 
nicipal service  plant  once  owned  by  the  city  could 
be  sold  or  leased  unless  the  transaction  was  rati- 
fied by  a  two-thirds  vote  of  all  the  people  voting 
thereon  at  a  city  election. 

The  proposed  San  Francisco  charter  provides 
that  "  every  ordinance  involving  the  grant  by  the 
city  and  company  of  any  franchise  for  the  supply 
of  light  or  water  or  for  the  lease  or  sale  of  any 
public    utility "  must  be   ratified  by  the   people. 

1  It  recently  failed  of  ratification,  though  indorsed  by  more 
than  half  of  the  votes  cast, 


634  MUNICIPAL   MONOPOLIES. 

Whenever  a  petition  equal  to  15  per  cent  of  all 
the  votes  cast  at  the  last  preceding  general  elec- 
tion is  presented  to  the  city  government  in  favor 
of  the  acquisition  of  any  public  utility,  and  a  vote 
of  the  people  thereon  is  requested,  such  a  proposi- 
tion must  be  formulated  by  the  city  government 
and  presented  to  the  people.  The  legislative 
branch  of  the  government  must  present  a  plan, 
and  the  mayor  may,  if  he  desires,  submit  an  alter- 
native plan.  The  legislative  branch  of  the  city 
may  also  submit  such  a  proposition  to  the  people, 
without  such  petition. 

In  both  the  Minneapolis  and  the  San  Francisco 
charters,  bonds  cannot  be  issued  for  the  acquisition 
of  a  municipal  plant  without  the  ratification  of 
two-thirds  of  those  voting  thereon. 

2.  A  company  should  be  guaranteed  a  monop- 
oly for  a  whole  city,  unless  the  city  be  as  large 
as  Chicago,  in  which  case  a  company  should  be 
guaranteed  a  monopoly  of  its  section  or  grand  di- 
vision of  the  city. 

3.  No  extension  of  a  franchise  should  be  made 
till  within  one  year  of  its  expiration.  This,  if  em- 
bodied in  a  charter  of  that  city,  would  prevent 
a  shrewd  corporation  from  taking  the  people  un- 
awares, when  a  council  was  in  office  that  was  not 
elected  on  the  issue  of  an  extension  of  franchises, 
as  is  so  common  now. 

All  extensions  that  can  possibly  be  made  by  an 


REGULATION   OR    OWNERSHIP?  635 

existing  company  should  be  so  made,  in  the  way 
prescribed  in  the  Berlin  street-railway  franchise 
given  in  Chapter  VII.1  This  follows  as  a  natural 
corollary  from  guaranteeing  a  monopoly.  There 
are  exceptional  conditions  where  a  new  company 
might  concede  low  fares  if  permitted  to  invade 
the  territory  of  an  existing  company.  If,  how- 
ever, it  is  possible  to  reduce  charges,  the  city  gov- 
ernment can  often  force  it  on  the  old  company, 
through  its  reserved  right  to  fix  reasonable  charges, 
unless  prevented  by  the  terms  of  the  franchise.  If 
the  latter  are  for  short  periods,  however,  as  they 
should  be,  it  would  be  far  better  for  the  city  to 
await  the  expiration  of  the  franchise.  Two  com- 
panies in  the  same  district  mean  duplication  of 
power  houses  or  manufacturing  plants,  etc. 

When  an  existing  company  is  allowed  to  extend 
its  plant  to  new  streets,  the  permit  or  franchise 
therefor  should  expire  with  that  of  the  rest  of  the 
system,  in  order  that  the  city  may  then  have  the 
opportunity  to  deal  with  the  entire  operation  of 
the  monopoly  throughout  the  city.  In  order  that 
such  a  requirement  should  not  interfere  with  ex- 
tensions, there  should  be  in  the  franchise  of  the 
original  company  such  provisions  as  have  been  no- 
ticed in  the  Berlin  contract  with  its  street  rail- 
ways, under  the  terms  of  which  the  city  agrees  to 

1  Pp.  562-565.  As  far  as  possible,  all  the  provisions  of  the 
Berlin  franchise  should  he  included  in  franchise  grants. 


G36  MUNICIPAL   MONOPOLIES. 

bear  part,  or  even  all,  of  the  expenses  of  exten- 
sions, according  to  the  time  still  to  elapse  before 
the  end  of  the  franchise. 

The  advantage  of  having  all  franchises  of  a  city 
expire  at  the  same  time,  and  then  putting  up  a 
new  franchise  at  auction,  is  illustrated  by  the 
offer  made  to  the  Chicago  city  council  as  this 
goes  to  press,  Jan.  9,  1890,  by  Lamson  Brothers 
&  Co.,  members  of  the  Chicago  Board  of  Trade, 
and  others,  claiming  to  represent  $35,000,000 
of  capital  in  Chicago  and  New  York.  This  syn- 
dicate offers  to  take  all  the  Chicago  street-rail- 
way lines  at  the  expiration  of  the  grants  in 
1893,  buying  all  the  property  used  in  the  street- 
railway  business  at  a  fair  valuation,  and  then  to 
grant  universal  transfers,  so  that  a  passenger  can 
2fO  from  the  extreme  northern  or  western  limit 
to  the  extreme  southern  limit  of  the  city  for  a 
single  fare.  They  furthermore  agree  on  a  25- 
year  franchise  to  sell  tickets  good  between  6  and 
8  a.m.  and  for  children  between  6  and  12  years 
at  all  hours  at  the  rate  of  10  for  30  cents. 

4.  Right  of  petition  to  some  State  or  local 
board  by  those  residing  or  owning  property  upon 
a  street  along  which  a  new  railway  is  proposed,  as 
provided  in  the  Massachusetts  law  of  1898.  The 
Illinois  law,  which  requires  the  consent  of  the 
majority  of  abutting  property  owners  before  a 
franchise  can  be  given,  is  very  bad,  since  it  opens 


REGULATION  OR   OWNERSHIP?  637 

the  way  to  the  purchase  of  such  consents  at  high 
prices  by  the  railway  company.  The  Massachu- 
setts law  merely  provides  for  a  hearing  by  the 
State  Board  of  Railroad  Commissioners,  after  the 
granting  of  a  permit  in  a  street  by  a  city  govern- 
ment. 

5.  Local  authorities  should  determine  what  new 
franchises  are  needed  and  in  case  there  is  no  ex- 
isting company  prepared  to  undertake  the  same, 
should  offer  the  franchise  to  the  best  bidder,  if  the 
public  do  not  wish  to  operate  directly.  This  bid 
may  be  in  the  direction  of  low  fares,  or  of  a  money 
compensation  as  the  public  may  prefer. 

6.  All  the  Massachusetts  restrictions  on  over- 
capitalization should  be  rigidly  applied,  and  a 
State  commission  should  see  to  the  enforcement 
of  such  restrictions.  The  preceding  chapters  on 
gas  and  street  railways  describe  these  Massachu- 
setts methods. 

7.  The  disposition  to  be  made  of  the  property 
of  a  monopoly  at  the  expiration  of  its  franchise 
should  be  carefully  provided  for  in  the  franchise 
itself.  It  may  be  provided  that  the  city  can  have 
the  plant  without  any  payment.  This  would  be 
very  good,  in  case  the  private  company  could  be 
induced  or  forced  to  keep  the  plant  in  thoroughly 
good  condition  up  to  the  end  of  the  franchise 
term  under  such  a  provision  as  this.  Otherwise  it 
would  be  better  to  give  the  public  its  share  of  the 


688  MUNICIPAL   MONOPOLIES. 

profits  of  the  franchise  in  lower  charges,  and  let 
the  city  possess  the  right  to  buy  the  plant  of  the 
private  company  at  the  end  of  its  franchise  at 
its  structural  value,  independent  of  its  earning 
power. 

8.  Publicity  and  public  audit  of  accounts  and 
inspection  of  the  quality  and  safety  of  the  service 
rendered  by  a  monopoly  are  essential  to  intelligent 
action  by  the  people.  In  enforcing  such  require- 
ments, the  mayor,  the  city  and  State  governments 
should  be  permitted  and  encouraged  to  seek  the 
best  professional  talent  in  the  whole  United  States 
or  abroad,  according  to  the  well-known  principles 
that  obtain  in  foreign  municipalities.  Unless  this 
is  directly  specified  in  the  State  Constitution,  or  in 
the  State  Legislation,  or  in  the  City  Charter,  the 
same  difficulty  will  be  sure  to  arise  which  now 
confronts  a  prominent  city  west  of  the  Missouri 
River.  As  one  condition  in  permitting  consolida- 
tion, this  city  was  at  some  pains  to  secure  the  ap- 
pointment of  a  gas-inspector  who  would  make  the 
proper  chemical  and  photometric  examination  of 
the  quality  of  gas  used;  but  this  city  now  finds 
that  it  has  no  such  expert  in  the  State,  and  is  pre- 
vented from  hiring  one  elsewhere  by  the  law  that 
requires  all  officials  to  be  citizens  of  the  State, 
while  the  prevalence  of  the  spoils  system  deters 
any  expert  from  trying  to  become  a  citizen  of  the 
State  for  the  purpose  of  becoming  a  candidate  for 


REGULATION  OR   OWNERSHIP  ?  639 

the  office.  A  sidewalk  inspector  consequently  is 
made  gas-inspector. 

9.  Every  American  State  might  well  adopt  a 
Local  Government  Board  like  that  of  England, 
with  the  right  to  enforce  the  restrictions  on  capi- 
talization, and  supervise  and  audit  the  bookkeep- 
ing of  all  publicly  and  privately  owned  municipal 
monopolies.  But  great  care  should  be  exercised 
to  prevent  such  a  board  from  keeping  secret  its 
accounts,  and  exerting  a  repressive  influence  on 
the  will  of  the  people  in  the  matter  of  municipal 
ownership.  In  our  larger  cities  this  regulation 
of  privately  owned  monopolies  should  be  intrusted 
to  a  city  commission,  composed  of  the  mayor, 
comptroller,  city  engineer,  and  auditor,  who  are 
directly  responsible  to  the  people  most  concerned. 

Under  private  operation  it  is  possible  to  have 
franchises  of  long  or  short  duration,  or  even  revo- 
cable at  will,  as  in  Massachusetts  and  the  District 
of  Columbia. 

LONG-TERM    FRANCHISES. 

The  famous  Massachusetts  Special  Street  Rail- 
way Committee,  in  its  recent  report,  shows  an 
astonishing  misconception  of  our  political  condi- 
tions when  it  states,  page  22  :  "If  our  municipali- 
ties or  corporations  choose  from  over-eagerness 
or  for  other  reasons  to  enter  into  ill-advised  or 
improvident    agreements,    which    they  afterwards 


640  MUNICIPAL  MONOPOLIES. 

repent,  that  is  their  affair ;  and  the  officials  enter- 
ing into  such  agreement  are  responsible  to  their 
constituencies,  whether  the  body  of  citizens  or  the 
holders  of  the  companies'  stock.  It  certainly  is 
not  the  part  of  the  Commonwealth,  either  to  pre- 
scribe the  terms  of  the  grants,  or  after  they  are 
made  to  examine  those  terms  with  a  view  to 
seeing  that  they  contain  nothing  of  which  the 
parties  to  them  may  thereafter  repent/' 

As  a  matter  of  fact,  when  officials  make  a 
50-year  franchise  contract  with  a  street-railway  or 
gas  company,  in  return,  perhaps,  for  a  big  bribe, 
the  defeat  of  such  people,  when  they  come  up  for 
re-election,  is  small  consolation  to  a  community, 
and  is  scarcely  any  safeguard  at  all. 

Equally  absurd  is  the  suggestion  of  this  same 
Massachusetts  Special  Committee  (page  33),  that 
we  may  wisely  allow  foreign  countries  to  experi- 
ment with  municipal  operation,  "sure  of  our 
ability  at  any  time  to  appropriate  all  the  results 
of  foreign  experience."  If  our  companies  mean- 
time secure  50-year  to  1000-year  franchises,  how 
much  ability  will  we  have  to  follow  foreign  ex- 
ample unless  by  purchasing  at  an  enormous  price 
the  franchise  we  have  just  given  away? 

According  to  this  same  report,  page  71,  the  fol- 
lowing twenty-one  States  place  no  limits  upon  the 
length  of  street-railway  franchises  which  their 
municipalities  may  grant :   Arkansas,  Connecticut, 


REGULATION  OR   OWNERSHIP  ?  641 

Delaware,  District  of  Columbia,  Florida,  Maine, 
Massachusetts,  Nebraska,  Nevada,  New  Hamp- 
shire, South  Carolina,  New  Jersey,  New  York, 
North  Dakota,  Oregon,  Pennsylvania,  Rhode 
Island,  Tennessee,  Vermont,  Virginia,  and  Wis- 
consin ;  although  in  Omaha  there  is  an  exclusive 
grant  for  fifty  years,  and  in  Greater  New  York 
the  charter  limits  such  grants  henceforth  for 
twenty-five  years,  and  allows  a  renewal  for 
twenty-five  years  more.  Two  States,  Louisiana 
and  Mississippi,  permit  99-year  franchises ;  North 
Carolina  allows  sixty  years.  Eleven  States  allow 
fifty  years,  namely:  Arizona,  California,  Illinois, 
Kentucky,  Minnesota,  Missouri,  New  Mexico, 
Texas,  Utah,  Washington,  and  West  Virginia; 
although  Sacramento  is  limited  to  twenty-five 
years,  and  in  Texas,  unless  specified  in  the  char- 
ter, no  franchise  can  be  granted  for  more  than 
twentjr-five  years.  Maryland  allows  a  40-year 
grant.  Two  States  permit  thirty  years  :  Georgia 
and  Michigan.  Five  permit  twenty-five  years  : 
Alabama,  Colorado,  Indiana,  Iowa,  and  Ohio, 
although  Denver  is  limited  to  twenty  years. 
Four  States  allow  but  twenty  years :  Kansas, 
Montana,  Oklahoma,  and  South  Dakota.  Wyo- 
ming allows  but  ten  years. 

Some  prominent  advocates  of  private  ownership 
admit  most  of  the  criticisms  usually  passed  upon 
such  ownership,  but  claim  that  the  solution  lies  in 


642  MUNICIPAL  MONOPOLIES. 

long  or  unlimited  franchises,  with  provisions  in  the 
contract  for  a  system  of  sharing  of  profits  with  the 
public,  and  a  reduction  of  charges  when  profits 
permit.  These  views  were  presented  in  Municipal 
Affairs  for  September,  1897,  by  Mr.  Edward  E. 
Higgins.  There  are  two  most  serious  objections 
to  this.  First,  that  it  violates  a  principle  that  is 
coming  to  be  more  and  more  recognized  and 
desired,  viz.,  that  no  generation  should  bind  its  suc- 
cessors, when  it  can  be  prevented  without  serious 
'loss  of  national  honor  and  strength.  The  second 
objection  is  the  impossibility  of  foreseeing  the  prog- 
ress of  the  arts  for  50  years  and  of  providing  for  it 
and  for  the  growth  of  a  city  by  a  wise  contract. 

How  impossible  it  is  to  legislate  for  conditions 
50  or  even  30  years  in  the  future,  in  this  age  of 
wonderful  invention,  is  well  illustrated  by  the 
scale  of  rates  established  for  the  ferry  across  the 
Chicago  River  in  1829,  viz.,  6|  cents  for  foot-pas- 
sengers, 25  cents  for  a  one-horse  business  wagon, 
50  cents  for  a  pleasure  vehicle,  and  6£  cents  for 
every  bushel  of  grain.  Had  the  State  Legislature 
then  attempted  to  fix  the  rates  of  fare  across  this 
river  for  50  years  at  what  might  at  that  time  have 
been  reasonable  rates,  it  would  have  been  no  more 
absurd  than  for  the  Legislature  to  do  it  now,  even 
admitting,  as  no  one  acquainted  with  the  subject 
will  do  for  a  moment,  that  present  rates  of  street- 
car fares  are  reasonable. 


REGULATION   OR    OWNERSHIP?  643 

When  the  first  bridge,  a  floating  one  of  rough 
logs,  was  thrown  over  the  Chicago  River  in  1833, 
by  the  help  of  the  United  States  troops  stationed 
at  Fort  Dearborn,  and  the  city  contributed  towards 
the  structure  $286.20  and  the  Pottawotomies 
$200,  the  people  were  as  capable  of  realizing  the 
conditions  pf  to-day,  and  of  legislating  for  them, 
as  are  we  for  those  of  a  half  a  century  hence. 

On  Feb.  16,  1848,  a  contributor  to  a  Chicago 
newspaper,  The  Democrat,  wrote  in  favor  of  plank 
roads  as  superior  to  railroads.     He  said :  — 

"  Do  railroads  give  the  same  facility  for  traveling  that 
plank  roads  do,  even  to  those  living  by  the  side  of  them? 
Their  stations  are  generally  ten  or  twelve  miles  apart. 
They  will  only  take  in  and  put  out  passengers  at  these 
places.  Our  plank-road  passengers  travel  at  the  rate  of 
ten  miles  an  hour,  which  is  as  fast  as  they  are  conveyed 
(and  with  ten  times  the  safety)  on  the  Michigan  Central 
Railroad.  The  charges  made  by  the  railroad  for  the  trans- 
portation of  produce  are  more  than  it  would  cost  the 
farmer  by  plank  roads,  and  very  little  less  than  common 
roads." 

What  would  have  been  more  ridiculous  than  for 
the  men  of  1848  to  have  tied  the  hands  of  the 
city  council  of  Chicago  as  to  how  they  could  regu- 
late the  steam  or  street  car  lines  entering  or  pass- 
ing through  the  city  in  1898  ;  and  yet  our  city 
councils  are  asked  to  make  contracts  for  50  years 
and  even  longer. 

The  well-known  reformer  of  Philadelphia,  Mr. 


644  MUNICIPAL  MONOPOLIES. 

Charles  Richardson,  in  his  paper  Dec.  1,  1898, 
before  the  National  Municipal  League,  puts  the 
argument  very '  tersely :  "Under  existing  condi- 
tions the  chances  of  any  city  obtaining  a  50-year 
or  other  long-term  agreement  which  will  be  en- 
tirely fair  and  desirable  for  the  people,  or  of 
securing  what  might  be  even  more  difficult,  a  full 
and  satisfactory  enforcement  of  such  an  agreement 
if  one  could  be  made,  seem  to  be  too  slight  for 
serious  consideration.  Even  if  it  were  practicable 
to  secure  such  an  agreement  and  its  continuous 
enforcement,  its  effect  upon  the  character  of  the 
local  governments  must  necessarily  be  exceedingly 
injurious.  A  bad  servant  who  can  be  dismissed  is 
much  better  than  a  master  from  whom  it  is  im- 
possible to  escape.  Republican  institutions  are 
based  upon  the  principle  that  the  people  should 
have  the  power  to  change  their  rulers  without 
resorting  to  assassination  or  revolution,  and  a 
long  lease  of  an  important  municipal  service  is 
simply  the  substitution  of  a  limited  monarchy  for 
a  popular  government  so  far  as  it  relates  to  that 
particular  function." 

Dr.  Albert  Shaw  puts  it  even  more  forcibly 
in  the  New  York  Independent  for  May,  1897 : 
"  Our  cities  to-day  in  various  States  are  passing 
through  a  great  crisis  because  of  an  enormous 
combination  of  street-railway  interests  that  is  at- 
tempting, by  concerted  movement,  apparently,  from 


REGULATION   OR   OWNERSHIP?  645 

one  end  of  the  country  to  the  other,  to  break  down 
honest  and  able  municipal  government  for  the  sake 
of  obtaining  50-year  extensions  to  their  franchises. 
There  is  no  excuse  for  a  50-year  franchise  in  this 
enlightened  age  of  the  world.  Even  if  municipal 
officials  have  the  right  to  give  away  valuable  as- 
sets that  belong  to  their  own  generation,  they 
have  no  right  to  sacrifice  posterity.  Any  man 
claiming  intelligence,  and  occupying  an  official 
position,  whether  in  a  legislature  or  municipal 
government,  who  works,  speaks,  and  votes  for 
measures  intended  to  make  it  easy  for  such  great 
corporations  to  get  50-year  extensions,  is  prima 
facie,  a  rascal." 

In  case  a  municipality  is  burdened  with  a  fran- 
chise of  long  duration,  and  desires  to  purchase  the 
same  with  a  view  to  direct  operation  or  a  new 
lease  for  a  short  period,  it  would  be  wiser  to  begin 
by  forcing  such  reduction  of  charges  as  the  courts 
will  permit.  This  is  entirely  legitimate,  and  will 
reduce  the  market  value  of  the  stock  more  nearly 
to  the  structural  value  of  the  plant  than  it  would 
otherwise  be.  City  ownership  would  not  then  in- 
volve so  large  a  purchase  of  water  as  if  it  were 
not  preceded  by  regulation  of  rates. 

SHORT-TERM   FRANCHISES. 

The  trend  is  away  from  50-year  franchises,  or 
longer,   to  about   20  years   or  less,   in  both  this 


646  MUNICIPAL  MONOPOLIES. 

country  and  Europe.  It  has  already  been  noticed 
that  Ohio  repealed  her  50-year  law  after  two  years  ; 
and  Illinois  is  demanding  the  same  action  regard- 
ing her  similar  50-year  Allen  Law,  passed  in  1897. 
The  latest  municipal  charters  are  those  of  San 
Francisco,  which  restrict  street-railway  franchises 
to  20  years,  and  of  Minneapolis,  which  proposed 
to  restrict  all  franchises  to  10  years.  The  Special 
Committee  on  a  model  city  charter  reported  to  the 
National  Municipal  League  in  December  in  favor 
of  limiting  all  franchises  to  21  years. 

According  to  the  Massachusetts  Special  Street 
Railway  Committee  (Report,  page  20)  these  limited 
franchises  are  said  to  be  "  productive  of  dissension, 
poor  service,  scandals,  and  unhealthy  political 
action."  Such  conditions,  unfortunately,  are  char- 
acteristic of  private  ownership  and  operation  of 
city  monopolies  under  all  sorts  of  franchises  in 
America.  Quite  possibly  short  franchises  keep 
street-railway  questions  prominently  at  the  front 
in  public  discussions.  Any  evils  resulting  from 
this  are  more  than  counterbalanced  by  the  result- 
ing education  of  public  opinion.  It  is  a  case  where 
peace  is  often  death.  When  a  community  is  found 
resting  content  with  enormous  monopoly  profits 
and  high  charges  in  its  city  monopolies,  it  de- 
serves the  rebuke  recently  administered  by  Gov- 
ernor Pingree  to  the  Michigan  Board  of  Railway 
Commissioners.     They   had    congratulated   them- 


REGULATION  OR   OWNERSHIP  f  647 

selves  and  the  public  on  the  friendly  relations 
existing  between  them  and  the  corporations  they 
were  supposed  to  regulate  and  supervise.  "You 
have  no  business  to  have  the  relations  so  friendly," 
remarked  the  then  mayor  of  Detroit. 

FRANCHISES    REVOCABLE   AT    WILL. 

In  theory  such  franchises  are  excellent,  if  ac- 
companied by  the  Massachusetts  and  English 
restrictions  on  capitalization,  since  they  permit 
the  reduction  of  fare  and  other  changes,  such 
as  in  motive  power  from  overhead  trolleys  to 
underground  conduits,  etc.,  when  demanded  by 
municipalities,  and  when,  in  the  opinion  of  our 
universal  source  of  appeal,  the  courts,  the  private 
company  concerned  can  afford  such  concessions, 
and  still  earn  a  fair  profit  on  its  necessary  cash 
investment.  Such  a  tenure,  however,  while  work- 
ing fairly  well  in  Massachusetts,  would  certainly 
open  the  way  elsewhere  for  all  manner  of  "hold- 
ups "  or  raids  by  unscrupulous  councils,  and  of 
corrupt  and  demoralizing  actions  by  private  cor- 
porations. 

This  method  broke  down,  even  in  the  case  of 
the  street  railways  of  Massachusetts,  the  moment 
it  threatened  to  be  burdensome  to  the  wealthy  in- 
terests involved.  No  Massachusetts  city  has  ever 
revoked   such    a   franchise.      An    official    of    the 


648  MUNICIPAL   MONOPOLIES. 

State  Railroad  Commission  assured  the  writer  two 
years  ago  that  his  commission  would  probably  be 
able  in  some  way  to  check  such  action,  and  any- 
way the  Legislature  would  almost  certainly  inter- 
fere by  new  laws  if  it  were  attempted.  Moreover, 
no  issue  of  municipal  bonds  for  a  city  street-railway 
plant  could  ever  occur  without  the  consent  of  the 
Legislature.  But  the  Legislature  in  1898  defi- 
nitely took  away  the  power  of  municipalities  to  re- 
voke street-railway  franchises  without  the  consent 
of  the  State  Railroad  Commission.  No  new  condi- 
tions can  now  be  imposed  on  existing  street-rail- 
way companies  by  municipalities,  even  in  return 
for  concessions  of  new  territory ;  while  the  West 
End  Company  of  Boston,  as  described  in  Chapter 
VIL,  has  been  granted  5-cent  fares  for  25  years, 
and  has  been  allowed  to  make  a  lease  for  the 
same  length  of  time  to  the  Boston  Elevated  Com- 
pany, for  8  per  cent  on  all  its  preferred  stock,  and 
7  per  cent  on  its  common  stock,  guaranteed  free 
of  all  taxes,  although  there  is  good  reason  for 
believing  that  a  portion  of  the  latter  stock  repre- 
sents no  existing  structural  values. 

PUBLIC    OWNERSHIP   OF   THE   TRACK   AND 
PRIVATE   OPERATION. 

This    recommendation    of    the    Massachusetts 
Special  Street  Railway  Committee  has  three  great 


REGULATION   OR   OWNERSHIP  .'  649 

advantages.  First,  it  would  enable  part  of  the 
capital  necessary  for  street  railways  to  be  borrowed 
at  low  rates  of  interest,  which  would  justify  a 
reduction  of  fares.  Second,  it  would  give  the 
city  greater  control  of  its  streets,  and  secure  the 
merging  of  track  and  pavement  so  as  to  cause  less 
trouble  to  wagon  wheels  and  bicycle.  Third,  the 
city  would  be  in  better  condition  to  deal  with 
troublesome  private  companies. 

It  might  also  be  better  able  to  secure  the  intro- 
duction of  underground  conduits  when  preferred 
in  the  heart  of  large  cities.  On  the  other  hand, 
where  cities  are  badly  governed,  public  ownership 
of  the  track  might  stand  in  the  way  of  such  im- 
provements, and  in  the  average  American  city 
might  increase  the  unfortunate  relations  and  bar- 
gains with  councilmen  so  common  to-day.  Such  a 
mixture  of  public  and  private  ownership  is  liable 
to  prove  worse  under  American  political  conditions 
than  would  either  form  of  ownership  by  itself,  as 
was  the  case  with  the  Philadelphia  gas-works  de- 
scribed in  the  preceding  chapter.  Public  ownership 
of  the  track  is  evidently  only  a  half-way  measure, 
although  probably  better  than  no  public  ownership 
at  all. 

THE   OHIO   METHOD. 

Since  1854,  Ohio  city  councils  have  had  the 
power  to  fix  by  ordinance  the  price  of  gas  for 
both  the  city  and  citizens  for  periods  not  exceed- 


650  MUNICIPAL  MONOPOLIES. 

ing  ten  years.  After  the  assent  of  the  gas-com- 
pany to  the  ordinance  is  given  in  writing,  the 
contract  is  held  to  be  binding  on  both  parties  ;  but 
of  course  any  excessive  reduction  may  be  brought 
into  the  courts.  Under  this  law  the  city  of  Cleve- 
land ordered  a  reduction  in  the  price  of  gas  in 
1891  from  $1  to  60  cents.  The  case  was  con- 
tested in  the  courts  ;  but  the  officials  of  the  gas-com- 
pany were  forced  to  admit  that  the  cost  of  gas  in 
the  burner,  aside  from  depreciation  of  about  seven 
cents,  and  profit,  in  both  the  large  and  the  small 
company,  then  and  now  supplying  the  city,  was 
only  about  forty  cents  per  thousand  feet  and  at 
times  less,  no  allowance  being  made  for  the  lighting 
and  extinguishing  of  street-lamps.  The  editors  of 
the  leading  papers  and  some  other  influential  peo- 
ple were  shown  to  be  receiving  free  gas ;  and  over 
$24,000  was  admitted  to  be  charged  in  1890  and 
1891  to  insurance  and  depreciation,  which  really 
did  not  go  to  those  purposes  at  all,  but  to  ex- 
penses which  the  secretary-treasurer  could  not  re- 
member, and  for  which  he  had  no  vouchers  or 
written  memoranda,  although  the  expenditure  of 
every  cent  for  other  purposes  was  plainly  ac- 
counted for  in  his  books.  The  entrance  of  a  com- 
peting gas-company  was  then  being  defeated  in 
the  council. 

So  searching  was  the  cross-examination  of  the 
city  prosecutor,  Gen.  Edward  S.  Meyer,  that,  with- 


REGULATION  OR   OWNERSHIP?  651 

out  waiting  for  the  production  of  any  testimony 
on  his  side,  the  two  companies  offered  80-cent  gas 
for  ten  years  with  a  rebate  or  franchise  tax  of  6| 
per  cent  on  this,  leaving  the  net  receipts  for  the 
company  about  75  cents,  while  General  Meyer  was 
of  opinion  that  if  he  had  felt  sure  of  the  perse- 
verance of  the  city  government  a  little  longer 
he  could  have  readily  secured  the  original  demand 
of  60  cents. 

As  one  of  the  Cleveland  companies,  the  Peoples' 
Gas-Light  and  Coke  Company,  which  has  paid  good 
dividends  on  the  reduced  price,  had  total  sales  of 
only  161,000,000  feet  in  1893-1894,  and  208,000,- 
000  in  1896-1897,  or  less  than  several  other  com- 
panies as  well  situated  with  respect  to  raw  material 
as  other  Ohio  cities,  it  is  quite  remarkable  that  no 
vigorous  effort  has  been  made  elsewhere  to  follow 
Cleveland's  method  of  price  reduction.  Probably 
one  explanation  is  to  be  found  in  such  relations 
between  city  governments  and  gas-companies  as 
are  typified  in  an  incident  of  a  few  years  ago  — 
not  over  ten  —  in  Cincinnati.  On  the  completion 
of  a  new  gas-holder  the  famous  head  of  the  gas- 
company  in  that  city,  General  Hickenlooper,  en- 
tertained the  entire  city  government  with  a  dinner 
in  the  empty  holder.  Many  a  city  government 
has  been,  in  more  ways  than  one,  ingulfed  in  the 
holders  of  our  city  monopolies. 

This  Ohio  method  of  price  reduction,  however, 


652  MUNICIPAL  MONOPOLIES. 

seems  legally  open  to  city  councils  in  many  other 
States,  and,  as  previously  suggested,  should  be  tried 
even  as  a  preliminary  to  public  purchase  of  the 
plants ;  because  such  regulation  of  price,  so  far  as 
the  courts  will  permit,  would  naturally  result  in 
a  reduction  in  the  value  of  the  securities  of  the 
monopoly  to  a  point  much  nearer  the  cost  of  du- 
plication than  now,  and  thus  render  easier  public 
purchase.  It  cannot  be  claimed  that  such  a  policy 
is  unjust,  at  least  in  the  great  majority  of  cases, 
where  companies  have  already  divided  in  stock 
and  cash  dividends  enough  to  have  given  a  fair 
return  from  the  start  on  the  structural  value  of 
the  plant  or  the  cash  investment,  and  to  have  paid 
for  all  depreciation  charges.  If  a  company  has 
preferred  to  pay  its  stockholders  exorbitant  and 
even  unearned  profits  rather  than  to  charge  off 
proper  amounts  for  depreciation,  that  is,  of  course, 
the  lookout  of  the  company.  No  corporation,  any 
more  than  an  individual,  can  expect  the  public  to 
permit  it  to  eat  its  cake  and  have  it  too.  It  is 
evident,  however,  that  this  method  of  control  can 
only  be  supplementary  to  others,  and  is  not  likely 
to  be  widely  enough  adopted  to  become  a  solution 
of  monopolistic  abuses. 

DIFFICULTIES    OF   REGULATION". 

Regulation  of  city  monopolies  is  indeed  much 
better  than  nothing,  but  is  far  from  a  final  or  sat- 


REGULATION   OB    OWN EB SHIP  f  653 

is  factory  solution  of  the  problem.  That  one  of 
our  scientific  students  most  favorable  to  regulation 
is  Prof.  John  H.  Gray,  of  the  Northwestern  Uni- 
versity, who  thinks  we  ought  to  try  this  method 
and  improve  our  municipal  accounts  before  we 
"  plunge  "  into  public  ownership.  After  a  most 
careful  examination  of  the  Massachusetts  situa- 
tion, obtained  by  personal  study  in  the  office  of 
the  Gas  and  Electric  Light  Commission,  he  reaches 
the  following  interesting  conclusions  : 1  — 

1.  That  the  law  creating  this  Massachusetts 
Commission  was  drawn  by  the  attorney  of  the 
Boston  Gas  Company,  and  introduced  into  the 
Boston  Board  of  Aldermen  by  his  brother,  and 
then  was  introduced  by  this  body  into  the  Legis- 
lature. 

2.  That  the  requirement  in  some  cities  that 
monopolies  shall  make  sworn  returns  is  "  morally 
degrading  and  economically  useless,  where  no 
right  or  practice  of  verification  of  such  report 
exists."  That  in  most  cases  where  States  do  re- 
serve the  right  of  audit  and  inspection,  "  the  bad 
traditions  of  administration,  the  well-known  hos- 
tility of  the  corporations  to  the  exercise  of  this 
light,  and  the  recognized  weakness  of  the  State 
governments,  make  such  an  effective  examination 
practically  impossible.     In  fact,  the   corporations 

1  See  articles  in  the  Quarterly  Journal  of  Economics  during 
1898  and  1899,  and  especially  Municipal  Affairs,  June,  1898. 


654  MUNICIPAL   MONOPOLIES. 

often  exercise  a  direct  and  powerful  influence  on 
the  election  and  appointment  to  office,  with  a  view 
to  keeping  the  governments  incapable  of  enforcing 
this  right." 

3.  That  Massachusetts  is  the  only  State  that 
has  "  ever  succeeded  in  finding  out  substantially 
what  the  gas-companies  have  actually  done,''  and 
that  "  it  is  highly  doubtful  if  even  Massachusetts, 
probably  the  best  governed  of  our  States,  could 
ever  have  got  at  these  facts  except  under  tacit 
agreement  on  the  part  of  the  Commission  to  with- 
hold these  returns  from  the  public." 

4.  "  There  is  no  doubt  that  our  age  has  be- 
come so  thoroughly  commercialized,  and  the  cor- 
porations have  been  allowed  to  practice  all  sorts 
of  abuses,  and  conduct  business  without  effective 
State  regulations  so  long,  that  in  the  present  back- 
ward condition  of  political  education  and  disorgan- 
ized public  administration,  the  private  corporations 
are  stronger  than  the  governments." 

5.  "  No  act  of  compensation  or  regulation  can 
be  effective  until  the  companies  are  convinced  that 
they  will  be  better  off  under  it  than  under  present 
or  impending  legislation.  .  .  .  No  regulation  Act 
beneficial  to  the  public  can  be  passed  without  the 
consent  of  the  gas-companies,  nor  can  it  be  en- 
forced without  their  co-operation.  .  .  .  The  Act 
establishing  the  [gas]  Commission  was  drafted  by 
and  passed  at  the  instigation  of  the  Boston  com- 


REGULATION  OR   OWNERSHIP?  655 

panies.  The  control  over  the  companies  was  the 
price  they  were  willing  to  pay  for  protection 
against  competing  companies." 

6.  "It  has  been  claimed  that  the  Commission 
has  not  done  all  that  the  public  expected  of  it ; 
that  it  has  even  winked  at  the  violation  of  law  by 
the  companies,  and  that,  too,  in  particulars  over 
which  it  was  given  special  jurisdiction.  While 
the  charge  is  possibly  true,  it  is  equally  probable 
that  the  greatest  wisdom  the  Commission  has  ever 
exhibited  is  just  at  this  point.  It  has  probably 
done  all  that  it  could  do  and  continue  to  exist." 

It  seems  to  be  the  idea  of  Professor  Gray  and 
other  friends  of  State  regulation,  that  the  Commis- 
sion is  doing  all  that  it  can  in  the  present  state  of 
public  opinion,  if  it  puts  some  restrictions  on  over- 
capitalization and  the  appearance  of  competing 
companies,  while  it  quietly  gathers  and  locks  up 
in  its  vaults  a  large  mass  of  information  which 
another  generation  may  be  able  to  examine.  The 
public  must  wait  patiently  until  these  facts  are 
gathered,  and  until  the  much  later  time  when 
they  can  be  given  to  the  public,  "  or  we  shall  be 
plunged  into  reckless  socialism  and  experiments." 
Unless  we  greatly  misread  the  temper  of  the 
American  people,  however,  they  will  not  wait 
in  patience  at  the  feet  of  the  monopolist,  nor 
will  they  offer  him  still  larger  profits  than  he 
now  gets,  in  return  for  the  information  that  he 


656  MUNICIPAL  MONOPOLIES. 

might  thus  give,  under  a  tacit  pledge  of  secrecy, 
to  some  State  official  or  even  in  return  for  the 
concession  to  the  public  of  the  right  to  restrict 
stock-watering.  Public  opinion  needs  but  to  real- 
ize fully  this  intolerable  situation  in  order  to  adopt 
regulating  methods  that  will  regulate,  or  to  follow 
the  example  of  England  in  municipal  operation. 
The  latter  is  likely  to  prove  the  line  of  least  resist- 
ance, and  will  not  be  stopped  by  the  cry  of  social- 
ism. The  application  to  other  public  utilities  of 
the  principles  of  public  ownership  and  operation 
that  have  proved  successful  with  our  water-works 
may  seem  to  some  minds  socialism,  but  it  is  evi- 
dently not  a  kind  that  will  alarm  most  people.  If 
such  an  outcome  does  appear,'  the  monopolist  who 
has  resisted  or  weakened  national  public  regula- 
tion will  have  only  himself  to  thank  for  the  re- 
sult. 

It  is  not  a  choice  between  a  present  satisfactory 
relation  with  city  monopolies  in  any  part  of  the 
country  and  possibilities  of  the  spoils  system  under 
public  ownership.  Conditions  could  scarcely  be 
worse  in  the  matter  of  political  demoralization  and 
lack  of  common  honesty  than  they  now  are.  A 
professor  in  a  prominent  Pennsylvania  university 
was  some  time  ago  given  to  understand  that  if  he 
would  give  an  opinion  favorable  to  the  lease  or 
sale  of  the  water-works  of  his  city  his  opinion 
would  be  worth  fully  $25,000,  and  he  says  that 


REGULATION   OR   OWNERSHIP  ?  657 

prices  have  risen  since  then.  The  demonetization 
of  silver  has  apparently  caused  no  fall  in  bribes ! 

The  chief  attorney  of  one  of  our  great  railway 
systems  says  that  he  was  the  only  railroad  repre- 
sentative that  recently  refused  to  bribe  the  city 
council  of  one  of  our  greatest  cities  in  order  to  get 
valuable  permits  which  would  be  of  general  advan- 
tage to  the  city.  If  the  other  roads  had  united 
with  his  the  same  permits  could  have  been  ob- 
tained, he  thought,  in  an  honorable  way ;  but  in 
discouragement  because  of  their  preference  for  bri- 
bery he  feels  forced  to  follow  their  example. 

The  governor  of  one  of  our  large  States  was  of- 
fered the  chance  to  buy  20,000  shares  of  stock 
without  any  cash  payment  down  if  he  would  sign 
a  certain  franchise  measure.  He  was  assured  and 
believed  that  his  signature  would  probably  raise 
the  value  of  those  shares  from  $1, -400, 000  to 
12,000,000.  Although  he  did  not  sign  the  bill, 
a  similar  one  was  signed  by  his  successor,  and  was 
attended  with  an  even  greater  rise  of  value  of  the 
securities. 

Governor  Pingree,  when  mayor  of  Detroit,  was 
offered  150,000  by  those  who  claimed  to  be  the 
agents  of  one  company,  and  a  trip  around  the 
world  by  the  agent  of  another  company,  if  he 
would  refrain  from  vetoing  certain  franchises. 

In  his  address  before  the  Nineteenth  Century 
Club  of  New  York  City,  Nov.  11,  1897,  the  gov- 
ernor said :  — 


658  MUNICIPAL   MONOPOLIES. 

"  Good  municipal  government  is  an  impossibility  while 
valuable  franchises  are  to  be  had  and  can  be  obtained  by 
corrupt  use  of  money  in  bribing  public  servants.  ...  I 
believe  the  time  has  come  for  municipal  ownership  of  street- 
railway  liues,  water,  gas,  electric-lighting,  telephone,  and 
other  necessary  public  conveniences,  which  by  their  nature 
are  monopolies." 

Said  Mayor  Swift,  when  major  of  Chicago,  in 
an  address  given  on  Dec.  28, 1896,  to  the  wealthy- 
Commercial  Club  of  his  city :  — 

"  Talk  about  anarchy :  talk  about  breathing  the  spirit  of 
commercialism !  What  does  it  more  than  the  representa- 
tive citizens  of  Chicago  ?  .  .  .  Who  bribes  the  Common 
Council?  It  is  not  the  men  in  the  common  walks  of  life. 
It  is  you  representative  citizens,  you  capitalists,  you  busi- 
ness men.  When  have  they  come  to  the  front,  either  in- 
dividually or  collectively,  and  inveighed  against  this  manner 
of  obtaining  franchises  ?  When  will  they  come  to  the  front, 
individually  or  collectively,  and  ask  of  the  Common  Coun- 
cil to  demand  adequate  remuneration  of  the  city?  Never 
to  my  knowledge." 

Many  of  our  newspapers  are  muzzled.  Mr. 
Henry  Doherty,  of  the  Columbus,  Ohio,  Gas  Com- 
pany, in  an  address  before  the  twentieth  annual 
meeting  of  the  Ohio  Gas-Light  Association,  at 
Cincinnati,   March   18,   1896, x    said:  — 

"  Keep  the  newspapers  on  your  staff,  also  the  city  au- 
thorities.   Now  how  to  do  this  is  sometimes  a  problem.  .  .  . 

1  See  Progressive  Age,  April  1,  1896. 


REGULATION   OR    OWNERSHIP  ?  659 

Say  you  would  go  to  the  managers  and  proprietors  of  your 
newspapers  with  such  a  proposition  as  this :  '  I  have  a  few 
shares  of  stock  to  sell  you  on  the  following  terms  :  I  will 
take  your  note,  secured  by  indorsing  the  stock  over  to 
me,  with  interest  at  a  rate  less  than  the  earning  capacity 
of  the  stock,  with  privilege  of  paying  it  at  any  time, 
upon  giving  sixty  days'  notice.'  To  be  brief,  it  should  be 
our  business  to-day  to  keep  the  stock  of  our  companies 
distributed  among  those  who  are  in  a  position  to  promote 
the  welfare  of  our  business." 

In  February,  1896,  Judge  Rhea,  counsel  for  A. 
J.  Blethen,  the  former  editor  of  the  Minneapolis 
Tribune,  thus  described  in  court,  according  to  a 
local  paper,1  the  relations  between  the  Tribune  and 
Mr.  Lowry,  president  of  the  street  railways  of 
Minneapolis  and  St.  Paul :  — 

"Mr.  Lowry  desired  a  newspaper  in  one  of  the  cities 
friendly  to  his  interests.  The  Globe  was  proposed  and  re- 
jected, and  Mr.  William  Henry  Smith,  as  manager  of  the 
Associated  Press,  called  Mr.  Lowry's  attention  to  him  [Ble- 
then]. Meetings  were  arranged  between  Blethen,  Lowry, 
and  Smith,  at  New  York  and  St.  Paul.  Mr.  Lowry  said 
that  he  needed  an  organ,  for  his  franchise  was  for  animal 
power  only,  and  not  very  secure.  At  Mr.  Lowry's  sugges- 
tion Mr.  Blethen  made  the  purchase  for  $250,000  [stock  of 
the  Tribune'].  .  .  .  Mr.  Lowry  agreed  to  indorse  Blethen's 
paper  for  balance  of  purchase  price.  From  that  time  the 
editorial  policy  of  the  paper  was  conducted  in  Mr.  Lowry's 
interests,  and  he  was  always  consulted.  At  that  time  An- 
derson and  Douglas  made  the  cities  a  proposition  for  a  cable 

1  See  Minneapolis  Journal,  Feb-  10,  18'J(3. 


660  MUNICIPAL  MONOPOLIES. 

line.  Every  paper  in  the  city  of  Minneapolis  favored  it  ex- 
cept the  Tribune,  which  fought  it  with  fifty  or  more  edito- 
rials. Some  claimed  that  Mr.  Lowry  was  part  owner  of  the 
Tribune.  Of  course  Blethen  peremptorily  denied  the  allega- 
tion. Mr.  Blethen  was  technically  the  proprietor  of  the 
paper,  and  it  would  never  do  to  allow  the  people  to  know 
that  Lowry  had  indorsed  his  paper  for  $160,000." 

In  a  certain  large  city  the  gas-company  refused 
to  sell  stock  to  a  gentleman  because  he  had  not 
sufficient  influence  locally.  The  company  said 
that  they  desired  to  have  their  stock  owned  by 
influential  people,  who  could  help  them  when 
questions  of  franchise  and  taxation  arose. 

ADVANTAGES   OF   MUNICIPAL   OPEKATION. 

The  greatest  advantage  of  municipal  ownership 
is  its  tendency  to  relieve  communities  from  cor- 
rupting relations  with  men  of  wealth,  described 
in  the  last  few  paragraphs.  Some  believe  that 
merely  the  form  of  corruption  would  be  changed 
thereby ;  that,  instead  of  the  corruption  of  the 
city  council  by  franchise-seeking  corporations, 
there  would  come  the  corruption  of  the  spoils 
system.  Even  if  this  should  at  first  prove  true, 
the  spoilsmen  can  be  cuffed  and  kicked  about  in 
the  gutter  ad  libitum  without  the  slightest  danger 
to  one's  social  or  business  position.  In  fact,  it  is 
becoming  almost  the  fashionable  thing  to  express 
disgust  at  the  political   office-seeker.      With  the 


REGULATION   Oil    OWNERSHIP?  661 

growing  need  of  civil  service  reform,  which  the 
increase  of  public  activities  is  sure  to  force  upon 
public  attention,  the  spoils  system  is  likely  to  die 
unhonored  and  despised. 

Our  rich  and  influential  citizens,  whose  finan- 
cial interests,  as  investors  in  franchises,  now 
prompt  them  to  desire  weak  or  corrupt  govern- 
ment, would,  under  public  operation,  have  no 
financial  interests  at  stake,  except  as  taxpayers, 
and  in  that  capacity  would  desire  efficient  admin- 
istration. To  attempt  reform  to-day  in  public 
regulation  of  private  ownership  is  to  endanger 
one's  position  as  editor,  professor,  preacher,  at- 
torney, or  man  of  affairs,  since  the  men  who 
gain  by  existing  corruption  and  degradation  of 
government  are  the  leading  supporters  of  our 
churches,  our  colleges,  and  our  business.  Against 
such  people  reform  has  hard  sledding. 

Those  who  urge  that  the  annexation  of  the 
Philippines  will  so  burden  our  consular  service 
as  to  force  its  reform  can  certainly  not  reject 
the  argument  that  there  is  more  likelihood  that 
the  increase  in  the  functions  of  city  government 
will  increase  the  forces  of  reform,  since  abuses  here 
will  be  more  closely  brought  to  our  citizens  than 
in  the  case  of  distant  islands. 

Our  most  eminent  student  of  municipal  prob- 
lems, Dr.  Albert  Shaw,  suggests  the  same  thought, 
that  it  is  likely  to  be  easier  to  reform  government 


662  MUNICIPAL  MONOPOLIES. 

under  public  than  under  private  ownership.     He 
says :  — 

"  The  practical  situation  in  the  United  States  is  rapidly- 
shifting  the  burden  of  proof.  The  relations  existing  no- 
toriously between  great  corporations  and  our  State  legisla- 
tures and  municipal  governments  are  forcing  upon  us  the 
question,  not  whether  in  some  directions  the  business  func- 
tions of  Government  can  be  safely  or  wisely  extended,  but, 
rather,  the  question  how  to  avoid  a  very  expensive  increase 
of  public  functions  as  the  only  visible  retreat  from  the  in- 
tolerable state  of  demoralization  into  which  Government 
has  fallen.  The  enormous  sums  of  money  contributed  for 
purposes  of  political  control  by  the  corporations  enjoying 
municipal-supply  privileges,  have  given  us  the  boss  system 
in  its  present  form.  And  the  boss  system,  which  in  fact 
knows  no  distinctions  of  political  party,  is  fast  destroying- 
State  and  municipal  government  as  the  steadfast  and  loyal 
servitor,  defender,  and  promoter  of  the  public  interest. 

"With  honest,  independent,  and  truly  representative 
government,  such  as  our  forefathers  knew,  and  such  as 
they  hoped  would  be  ours  in  perpetuity,  it  would  seem  to 
me  a  matter  of  comparatively  little  moment  whether  the 
public  welfare  were  served  by  the  municipal  ownership 
and  operation  of  gas-plants,  or,  under  fair  terms,  by  a 
private  company.  On  some  accounts  I  should  consider- 
ably prefer  the  latter  alternative.  But  with  weak  and 
flabby  government,  lacking  in  moral  stamina,  and  lacking 
the  intellectual  force  to  make  advantageous  bargains  with 
private  corporations,  I  should  be  inclined  to  the  opinion 
that  direct  ownership  and  operation,  as  offering  less  temp- 
tation, might  well  have  better  results  for  the  community 
in  some  cases.  At  least  it  would  tend  to  build  up  the 
municipal  government  on  the  side  of  its  dignity  and  pres- 


REGULATION   OR    OWNERSHIP  f  663 

iige;  so  that,  in  the  end,  it  might  possess  enough  charac- 
ter, intelligence,  and  stability  to  be  able  to  meet  a  transit 
company  or  a  lighting  company  on  something  like  equal 
terms,  and  grant  a  franchise  on  terms  which  would  not 
involve  the  betrayal  of  the  rights  of  the  community."  1 

Not  only  does  municipal  ownership  and  oper- 
ation tend  to  transform  a  large  element  of  the 
wealthy  from  interested  opponents  to  friends  of 
good  government,  but  it  tends  to  develop  the 
civic  interests  of  the  mass  of  voters.  This  view 
was  ably  presented  at  the  National  Municipal 
League  in  December,  1898,  by  Mr.  Charles  Rich- 
ardson of  Philadelphia,  in  a  paper  indorsed  by  the 
other  members  of  the  Special  Committee  on  muni- 
cipal programme.     He  says  :  — 

"  As  the  character  of  every  Republican  government 
must  depend  in  the  last  analysis  upon  the  active  interest 
of  the  voters,  it  is  obvious  that  every  lease  or  agreement 
which  ties  the  hands  of  a  local  government,  and  lessens  its 
ability  to  serve  and  protect  the  voters,  must  tend  to  dimin- 
ish their  interest  in  supporting  or  improving  it.  While  it 
is  not  possible  to  strip  a  city  government  so  enth-ely  of 
power  as  to  make  it  incapable  of  attracting  the  efforts,  or 
serving  the  purposes  of  bad  men,  it  is  possible  to  render  it 
so  powerless  to  accomplish  good  or  restrain  evil,  that  the 
average  citizen  can  no  longer  be  induced  to  take  an  active 
interest  in  it. 

"There  is  much  force  in  the  argument  that  so  long  as 
each  voter  can  directly  affect  the  character  and  the  conduct 
of  his  local  government  his  interest  in  it  will  be  in  propor- 

1  New  York  Independent,  May  6, 1897. 


664  MUNICIPAL   MONOPOLIES. 

tion  to  the  number,  importance,  and  directness  of  the  differ- 
ent ways  in  which  that  government  serves  and  affects  him. 
So  far  as  he  may  come  to  regard  it  as  his  business  agent 
he  will  want  to  guard  and  improve  it.  So  far  as  it  becomes 
the  servile  instrument  of  private  corporations  in  which  he 
has  no  voice  or  share,  he  will  cease  to  respect  or  care  for 
it.  .  .  .  And  it  should  be  remembered  that  a  large  major- 
ity of  the  voters  have  no  private  property  directly  subject 
to  assessment,  and  are  therefore  much  more  likely  to  take 
an  interest  in  the  management  of  their  public  property  and 
public  services  than  they  are  in  any  questions  of  municipal 
income  or  rates  of  taxation.  If  we  want  the  people  to 
develop  higher  civic  ideals  we  must  enlarge  the  scope  and 
importance  of  their  city  government.  If  we  want  them  to 
appreciate  the  advantages  of  intelligence  and  fidelity  in 
their  public  servants,  we  must  give  those  servants  such 
duties  and  responsibilities  that  incompetence  and  dishon- 
esty can  neither  be  concealed  nor  endured." 

Mayor  Jones  declared  at  the  annual  convention 
of  the  League  of  American  Municipalities  at  De- 
troit, August  4,  1898 :  — 

"  The  greatest  good  that  we  are  to  find  through  muni- 
cipal ownership  will  be  found  in  the  improved  quality  of 
our  citizenship,  •  .  .  because  of  the  family  feeling  and  truly 
patriotic  sentiment,  the  love  of  country,  which  is  love  of 
our  fellow-man,  that  will  be  awakened  in  man's  breast  by 
the  contemplation  of  the  fact  that  he  is  a  member  of  a  fam- 
ily which  owns  its  own  streets,  which  owns  its  own  bridges, 
which  owns  its  own  water-works,  which  owns  its  own  light- 
ing plants,  which  owns  its  own  telephone  and  express  and 
messenger  service ;  a  member  of  a  family  which  owns  and 
does  everything  for  the  family  that  can  by  any  possibility 
be  better  done  by  collective  than  by  private  effort." 


REGULATION   OR   OWNERSHIP?  665 

Another  reason  for  public  ownership  is  its  ten- 
dency to  give  higher  wages  and  shorter  hours  to 
workingmen,  and  to  permit  their  membership  in 
labor  organizations.  To  be  sure,  public  employ- 
ment in  America  sometimes  errs  on  the  other 
side  by  making  the  contrast  too  great  between 
private  and  public  business,  and  by  not  insisting 
rigidly  upon  efficiency  somewhat  in  proportion  to 
the  pay  given.  This  lessens  the  interest  of  the 
masses  in  civil  service  reform,  which  seems  to 
erect  barriers  against  the  passing  around  among 
many  people  of  these  lucrative  public  jobs.  But 
within  such  limits  as  the  common  sense  of  the 
people  is  likely  in  the  long  run  to  insist  upon, 
there  are  many  advantages  in  this  tendency  to 
better  pay  and  shorter  hours  in  public  work. 

A  fourth  reason  for  municipal  ownership  and 
operation,  which  the  writer  has  never  heard  or 
seen  discussed,  but  which  appears  very  impor- 
tant, arises  from  the  custom  in  America  of  mak- 
ing abutting  land  pay  for  street  improvements 
which  enhance  the  value  of  the  land.  Under 
private  ownership  thousands  of  owners  of  sub- 
urban land  are  made  rich  in  every  city  by  the 
increase  of  land  values  through  the  construction 
of  street  railways,  gas-works,  electric-light  and 
telephone  wires,  as  well  as  by  water-mains,  street- 
paving,  and  sidewalks.  There  would  be  no  in- 
justice, but  the  greatest  public  advantage,  under 


666  MUNICIPAL  MONOPOLIES. 

public  ownership,  in  paying  for  these  extensions 
by  special  assessments  on  the  increased  value  of 
these  suburban  lots. 

A  fifth  reason  for  municipal  ownership  and 
operation  arises  from  the  acknowledged  tendency 
of  such  management  to  render  service  at  the  lowest 
price  consistent  with  payment  of  a  low  rate  of  in- 
terest, and  perhaps  the  accumulation  of  a  sinking- 
fund  that  shall  ultimately  render  unnecessary  all 
interest  charges,  while  the  natural  tendency  of 
private  operation  is  to  charge  such  a  price  as  will 
give  the  highest  net  profit.  Such  a  price  is  likely 
to  be  higher  than  that  which  will  yield  merely  4 
to  5  per  cent  interest  of  the  capital  invested. 
There  are  such  large  social  benefits  from  reduc- 
tion in  charges  of  street  transportation,  the  tele- 
phone, electric  light,  gas  for  fuel  and  illumination, 
etc.,  that  there  is  special  reason  for  applying  pub- 
lic ownership  to  that  class  of  monopolies. 

Finally,  and  as  a  result  of  the  tendency  of  public 
operation  as  just  spoken  of,  the  argument  from  ex- 
perience and  statistical  comparisons  of  public  and 
private  plants  similarly  situated  is,  on  the  whole, 
favorable  to  municipal  undertakings  of  the  char- 
acter under  discussion. 

The  position  is  well  stated  by  a  vigorous  oppo- 
nent of  public  ownership,  Mr.  Allen  Ripley  Foote, 
who  gives  a  most  important  and  unintended  argu- 
ment in  its  favor  when  trying  to  show  how  statis- 


REGULATION  OR   OWNERSHIP?  667 

tical  comparisons  between  public  and  private  plants 
are  unfair.1  He  says  a  public  plant  "  has  no  ex- 
pensive conflicts  with  the  municipal  councils,  nor 
is  it  compelled  to  maintain  a  lobby,  resort  to  bri- 
bery, give  interest  in  stocks  or  bonds  to  politicians, 
or  fee  able  attorneys  to  watch  '  strikes '  in  the 
legislature  or  council,  and  to  resist  unjust  taxa- 
tion. It  does  not  have  to  '  fight '  to  obtain  new 
legislation  or  ordinance  before  it  can  extend  or  im- 
prove its  service,  or  make  changes  in  its  motive 
power.  These  suggested  disabilities  under  which 
every  public  service  corporation  operates  to  a 
greater  or  less  degree,  none  of  which  inhere  in  the 
conditions  imposed  upon  municipalities,  tend  to  in- 
crease capitalization,  increase  rates  of  interest  and 
the  cost  of  operation,  through  fixed  charges  or  other- 
wise, and  correspondingly  to  increase  the  necessary 
price  charged  users  for  the  service  rendered." 

The  preceding  chapters  have  illustrated  this 
reason  for  public  operation  —  the  financial  mdvan- 
tages  to  the  taxpayer  and  consumer. 

Since  the  chapter  on  electric  light  has  gone  to  press  the 
writer  has  received  the  report  made  in  the  summer  of  1S98 
by  Ex-Mayor  Matthews,  of  Boston,  as  agent  of  the  Boston 
Electric  Light  Company.  In  this  he  attempts  to  defend 
the  position  that  a  new  contract  of  the  private  Boston  Com- 
pany, for  2,749  arc  lights  at  1127.75  per  light,  is  cheaper 
by  about  $7  than  would  be  the  cost  of  Detroit  municipal 

1  Municipal  Affairs,  June,  1897.  Article,  "No  Government 
Should  Operate  au  Industry. " 


668  MUNICIPAL  MONOPOLIES. 

lights  on  a  commercial  basis,  if  due  allowance  were  made 
for  fixed  charges,  depreciation,  difference  in  the  cost  of 
coal,  larger  proportion  of  conduits,  etc.,  in  Boston.  The 
comparison  is  unfair  by  reason  of  the  smaller  number  of 
street-lights  —  only  1,744  —  and  the  entire  absence  of  com- 
mercial lighting  in  the  Detroit  public  plant.  Mr.  Mat- 
thews admits  that  to  reach  his  result  he  must  add  over  $10 
to  the  legitimate  cost  of  the  municipal  plant,  because  a 
private  company  would  demand  6  per  cent  return  on  the 
investment  instead  of  4  per  cent,  and  would  have  to  pay 
nearly  $2  more  per  light  for  insurance,  fire,  and  liability 
to  cover  the  profits  of  a  private  insurance  company.  Mr. 
Matthews  further  charges  for  depreciation  7h  per  cent 
instead  of  5  per  cent;  although  the  latter  is  considered 
ample  by  competent  engineers,  and  is  twice  the  average 
allowance  in  the  private  companies  of  Massachusetts.  On 
Mr.  Matthews's  own  showing,  therefore,  without  any  attempt 
at  criticism  for  the  moment  of  his  other  computations,  or 
making  any  allowance  for  the  difference  in  the  number  of 
lights,  a  municipal  plant  in  Boston  could  set  aside  5  per 
cent  depreciation  yearly  and  still  furnish  light  for  $110  a 
year,  thus  saving  at  least  $17.75  a  light  under  public  own- 
ership, which  would  amount,  on  2,749  lights,  to  $48,795 
per  year.  This  amount  of  advantage  Boston  consents  to 
forego  in  order  to  continue  to  enjoy  the  supposed  blessings 
of  private  ownership. 

OBJECTIONS    AND   DIFFICULTIES. 

Aside  from  the  clangers  of  the  spoils  system, 
which  have  just  been  considered,  it  is  claimed 
that  public  operation  is  socialistic.  This  argu- 
ment would  apply  equally  well  to  the  Post-Office, 
and  has  ceased  to  be  a  bugbear.     Those  who  con- 


REGULATION   OB   OWNERSHIP  ?  669 

sicler  this  claim  usually  add  that  the  danger  is 
that  communities  will  not  know  when  to  stop  in 
their  assumption  of  business  enterprises.  Simi- 
larly, a  man  should  not  eat,  lest  he  fail  to  realize 
when  he  has  had  enough. 

Mr.  Garcke,  the  editor  of  an  excellent  "Manual 
of  Statistics  of  Electrical  Undertakings,"  in  Great 
Britain,  and  an  advocate  of  municipal  electric 
lighting,  objects  to  municipal  tramways  on  the 
ground  that  the  development  of  England  will  be 
hastened  by  lines  running  through  several  towns, 
as  does  the  West  End  System  of  Massachusetts. 
He  does  not  see  how  municipal  ownership  and 
operation  can  accommodate  itself  to  this  need. 
In  America  the  problem  is  not  so  serious,  because 
only  small  towns  are  usually  near  a  large  city. 
The  latter  annexes  most  of  its  suburbs ;  and  if,  as 
is  most  likely,  a  city  uses  its  tramway  lines  to 
secure  cheap  transportation  rather  than  a  large 
profit,  it  is  not  likely  that  outlying  towns  would 
often  seek  to  check  the  growth  of  a  city-owned 
line,  any  more  than  now  in  the  case  of  private 
lines  that  seek  extension  into  suburbs.  It  is  also 
possible  to  develop  a  new  center  of  local  govern- 
ment for  the  purpose  of  operating  street  railways 
through  many  townships,  as  was  done  in  Cook 
County,  Illinois,  when  a  large  sanitary  district 
was  organized  to  build  the  drainage  canal  from 
Chicago  to  the   Illinois   River.     It  is  also  quite 


670  MUNICIPAL   MONOPOLIES. 

likely  that  interurban  lines  may  be  left  to  private 
management  for  some  time  after  public  ownership 
is  tried  in  cities.  It  is  not  found  difficult  in  Chi- 
cago for  outlying  roads  to  be  operated  by  inde- 
pendent companies  that  transfer  to  the  great 
central  systems,  or  that  quite  often  connect  with 
them  without  transfers. 

The  most  serious  objection  to  municipal  owner- 
ship and  operation  is  the  possibility  that  such  oper- 
ation would  not  be  so  progressive  in  the  testing  of 
the  latest  inventions  and  in  extensions  to  undevel- 
oped territory  as  is  the  present  system.  This  it  is 
impossible  to  determine,  save  by  reference  to  expe- 
rience with  water  and  electric-light  plants  in  this 
country,  and  with  such  plants,  together  with  gas 
and  telephone  systems  abroad.  In  all  these  cases, 
extension  to  new  territories  seems  to  have  been  as 
characteristic  of  public  as  of  private  ownership. 
American  water-works  frequently  extend  their 
mains  where  private  companies  have  refused  to 
go  for  lack  of  the  prospect  of  immediate  returns. 
Publicly  owned  gas-works  of  England  seem  as 
ready  to  adopt  water-gas,  or  labor-saving  machin- 
ery in  charging  their  retorts  with  coal  as  do  the 
private  works. 

By  way  of  partial  reconciliation  between  the 
over-haste  of  some  advocates  of  municipalization 
and  the  exaggerated  fears  of  opponents,  it  should 
be  added,  that  as  the  matter  is  likely  to  work  itself 


REGULATION   OR   OWNERSHIP?  671 

out  in  practice,  the  question  is  not  going  to  be  one 
of  sudden  transition,  but  rather  one  of  gradual 
experimentation.  Each  municipality  will  watch 
critically  the  results  elsewhere,  and  hasten  or 
retard  its  own  action  according  to  evidence  of 
success  or  failure  in  other  places  similarly  circum- 
stanced. Neither  is  the  question  one  of  universal 
transition  from  private  to  public  management. 
For  some  time  to  come,  all  that  America  is  likely 
to  see  is  an  imitation  of  what  now  appears  in 
England,  namely,  the  spectacle  of  public  and  pri- 
vate plants  working,  side  by  side,  in  adjoining 
cities,  each  a  check  upon  the  other,  until  it  is 
clearly  demonstrated  which  offers  the  greatest 
economic,  political,  and  social  advantages. 

The  obstacles  in  the  way  of  municipalization 
are  still  very  great  in  this  country.  The  Pro- 
gressive Age  for  August,  1897,  reports  that  the 
Northwestern  Electric  Association,  at  a  meeting, 
July  15  of  that  year, 

"  unanimously  and  enthusiastically  adopted  a  report  recom- 
mending the  appointment  of  a  committee  of  three  to  .act 
for  the  association,  and  prevent  by  all  honorable  means 
the  establishment  of  any  municipal  and  opposition  plants ; 
to  gather  facts  and  figures  in  regard  to  municipal  lighting, 
that  will  be  of  use  to  central  stations  which  are  threatened 
with  municipal  opposition  ;  confer  with  the  manufacturers 
of  electrical  apparatus,  and  secure,  if  possible,  their  willing- 
ness to  be  guided  by  the  wishes  of  this  association  ;  to  in- 
vestigate every  appeal  that  is  made  to  them  through  any 


672  MUNICIPAL  MONOPOLIES. 

of  the  central  stations,  managers,  or  owners  in  our  territory, 
and  if  satisfied  that  the  local  plant  is  ready  to  deal  honestly, 
fairly,  and  justly  with  the  municipality  or  the  citizens,  they 
will  request  that  the  manufacturers  of  electrical  machinery 
shall  not  bid  on  a  proposed  plant." 

It  will  be  very  difficult,  for  some  time  to  come, 
to  get  through  legislatures  and  city  councils,  in 
the  teeth  of  wealthy  interests,  such  changes  in 
city  charters  and  methods  of  dealing  with  fran- 
chises as  will  permit  city  management,  even  when 
desired,  as  it  probably  is  to-day  by  the  mass  of 
city  voters. 

Where  cities  have  reached  the  limit  of  debt,  and 
cannot  secure  from  the  State  the  right  to  intro- 
duce in  their  charters  the  wise  provisions  sanc- 
tioned by  the  National  Municipal  League  relative 
to  the  power  to  increase  debts  when  for  revenue- 
producing  enterprises,  the  Des  Moines  method 
may  be  employed.  McCaskey  &  Holcomb,  Elec- 
tric Light  Contractors,  have  agreed  to  construct  a 
good  plant,  and  to  operate  500  arc  lights  all  night 
every  night  for  $62.50  each,  the  city  to  levy  a  two- 
mill  tax  for  two  years,  supposed  to  yield  about 
$60,000,  and  the  balance  of  the  cost  of  construc- 
tion of  $45,000  for  a  plant  with  a  capacity  of  600 
arcs  and  1,500  incandescents  for  city  buildings, 
to  be  paid  out  of  the  lighting-fund  from  what  is 
saved  through  reduction  in  rates.  It  has  been 
estimated  that  two  years  on  this  basis  would  suf- 


REGULATION  OR   OWNERSHIP  ?  673 

fice  to  pay  for  the  plant,  the  company  to  operate 
until  paid  for.  Some  litigation  with  the  old  com- 
pany has  thus  far  prevented  the  acceptance  of  the 
contractor's  offer,  but  the  plan  appears  feasible  for 
many  cities. 

Another  method  is  that  in  vogue  in  the  electric- 
light  plant  in  Springfield,  111.,  described  on  pages 
281-285  of  this  book. 

MUNICIPAL    OPERATION. ITS    RECENT    GROWTH. 

The  facts  already  given  in  this  book  prove  the 
rapid  development  of  municipal  operation,  al- 
though the  magnitude  of  this  movement  is  dis- 
puted by  no  one.  Of  the  50  largest  cities  in  the 
United  States,  41  have  public  water-works,  19  of 
these  have  changed  from  private  ownership,  while 
only  one  large  city,  New  Orleans,  has  changed 
from  public  to  private  management.  In  England 
and  Wales,  45  of  the  64  great  towns  and  county 
boroughs  own  their  water-works,  as  do  all  the 
large  towns  in  Scotland,  and  Dublin,  Belfast,  and 
Cork  in  Ireland.  In  November,  1898,  the  Lon- 
don County  Council,  by  101  to  15,  decided  to 
proceed  immediately  to  obtain  Parliamentary  per- 
mission for  owning  and  operating  its  water  supply. 

The  rapid  development  of  municipal  electric 
light  has  also  been  noted  in  the  United  States,  the 
number  of  plants  having  grown  from  200  in  1892 
to  nearly  400  in  1898.     In  Great  Britain  and  Ire- 


674  MUNICIPAL  MONOPOLIES. 

land,  even  including  London,  where  private  own- 
ership secured  a  great  start,  municipalities  sold, 
in  1895,  31.9  per  cent  of  the  30,203,766  kilowatts 
of  total  consumption  of  electric  energy,  and  in 
1897,  45.2  per  cent  of  the  60,125,476  kilowatts, 
or  Board  of  Trade  units  of  consumption.  In  the 
latter  year  36  private  British  companies  reported 
an  average  price  of  5.62df.,  or  about  11  cents  per 
kilowatt,  according  to  our  authority  for  these  fig- 
ures, Garcke's  "Manual,"  and  a  profit  of  6.54  per 
cent  on  the  capital  invested,  while  54  municipali- 
ties reported  an  average  price  of  4.68c?.,  or  about 
9.3  cents  per  kilowatt,  and  a  profit  of  5.73  per 
cent. 

In  the  case  of  gas,  progress  toward  municipali- 
zation has  been  greatly  checked  everywhere  by  the 
development  of  electric  light ;  but  this  check  will 
be  only  temporary  if  municipalities  realize  the  real 
importance  of  this  illuminant  and  fuel.  The  num- 
ber of  public  gas-works  in  America  in  1898  was 
11,  and  in  England  212,  or  almost  one-third  (32.7 
per  cent)  of  the  648  companies.  These  public 
plants  sold  36.4  per  cent  of  all  the  gas  used  in  the 
United  Kingdom,  and  about  one-half  of  that  out- 
side of  London;  and  in  the  entire  kingdom  had 
48.8  per  cent  of  the  total  number  of  consumers. 

As  shown  in  Chapter  IV.,  public  operation  of 
telephones  is  rapidly  developing  on  the  continent 
of  Europe,  and  a  parliamentary  committee  has  just 


REGULATION   OR    OWNERSHIP  f  675 

given  a  unanimous  report  in  favor  of  the  develop- 
ment of  such  operation  on  a  large  scale  in  Great 
Britain. 

With  respect  to  street  railways,  only  a  begin- 
ning has  been  made  in  America  in  the  case  of  the 
Brooklyn  Bridge ;  but  of  the  1,057  miles  of  track 
in  the  United  Kingdom,  318  miles,  or  21  per  cent, 
are  publicly  operated,  in  16  cities.  Consul  Boyle, 
of  Liverpool,  writes  to  our  government  that  public 
ownership  of  street  railways  has  progressed  so  far 
that  American  electricians  desiring  English  con- 
tracts need  not  have  a  list  of  cities  with  such  pub- 
licly owned  enterprises,  "  as  nearly  every  city  and 
town  of  importance  in  Great  Britain  has  such  work 
under  progress  or  in  contemplation,  .  .  .  and  those 
interested  can  hardly  go  astray  by  addressing  the 
city  engineer  of  any  large  city  in  England  or  Scot- 
land ;  and  the  same  suggestion  holds  good  to  a 
limited  extent  for  Irish  and  Welsh  municipalities." 

Although  the  American  movement  is  behind  the 
English  or  the  German  in  its  record  of  accomplish- 
ments, the  development  of  public  opinion  toward 
municipalization  is  advancing  in  America  with  ex- 
traordinary strides.  The  American  Federation  of 
Labor,  with  over  half  a  million  members  among 
our  skilled  workers,  adopted  with  scarcely  any  op- 
position, in  its  annual  convention  in  December, 
1896,  the  following  resolution,  which  it  has  prac- 
tically reiterated  in  subsequent  sessions :  — 


676  MUNICIPAL  MONOPOLIES. 

"  Whereas,  The  influences  of  corporations,  holding  or 
seeking  to  obtain  possession  of  public  franchises,  are  among 
the  most  potent  influences  antagonistic  to  reformative  meas- 
ures, and  the  most  active  cause  of  corruption  in  politics  and 
of  mismanagement  and  extravagance  in  public  administra- 
tion ;  therefore,  be  it 

"  Resolved,  That  the  sixteenth  annual  convention  of  the 
American  Federation  of  Labor  urges  upon  all  the  members 
of  affiliated  bodies  that  they  use  every  possible  effort  to 
assist  in  the  substitution,  in  all  public  utilities  —  munici- 
pal, State,  and  national — -that  are  in  the  nature  of  monopo- 
lies, of  public  ownership  for  corporate  and  private  control." 

At  the  Detroit  convention  of  the  League  of 
American  Municipalities  in  August,  1898,  when 
1,500  members  of  the  city  councils  and  other 
branches  of  city  governments  and  many  promi- 
nent mayors  were  present  from  cities  in  all  parts 
of  the  country,  the  sentiment  was  overwhelmingly 
in  favor  of  municipal  ownership  and  operation  of 
public  utilities.  In  a  recent  symposium  in  a  New 
York  daily,  the  mayors  of  Atlanta,  Cincinnati, 
Toledo,  and  St.  Paul  took  this  position,  which 
Governor  Pingree  is  also  vigorously  championing. 

At  the  December  convention,  1898,  of  the  Na- 
tional Municipal  League,  a  municipal  programme 
and  a  model  charter  were  presented  by  such  eminent 
students  of  municipal  government  as  Dr.  Albert 
Shaw,  Horace  E.  Deming,  and  Professor  Frank  J. 
Goodnow,  of  New  York,  Charles  Richardson,  Clin- 
ton Rogers  Woodruff,  and  Professor  Leo  S.  Rowe, 


REGULATION   OR   OWNERSHIP?  677 

of  Philadelphia.  In  this  model  city  charter  it  was 
provided  that  cities  "may  acquire  or  construct  and 
may  also  operate  on  their  own  account  .  .  .  rail- 
roads or  other  means  of  transit  or  transportation 
and  methods  for  the  production  or  transmission  of 
heat,  light,  electricity,  or  other  power  in  any  of 
their  forms,  by  pipes,  wires,  or  other  means,"  and 
that  a  city  may  also  issue  bonds  without  debt-limit 
restrictions,  if  their  bonds  are  for  a  revenue  pro- 
ducing business. 

It  was  advised  that  cities  of  more  than  25,000 
inhabitants  should  have  the  same  right  of  making 
their  charters  and  providing  for  the  ownership  and 
operation  of  any  public  utilities  that  is  now  pos- 
sessed by  the  people  of  a  State  in  the  making  of 
State  constitutions.  The  limitation  of  municipal 
franchises  to  21  years,  public  audit  of  the  accounts 
of  companies  receiving  franchises,  and  other  pub- 
lic safeguards  were  also  urged. 

Instead  of  providing,  as  did  Connecticut  in  1893, 
that  public  ownership  could  not  occur  without  "  a 
two-thirds  majority  vote  at  each  of  two  legal  town 
or  borough  meetings,  duly  called  for  that  purpose," 
and  not  less  than  a  year  apart,  this  able  committee 
of  the  League  proposed  that  a  two-thirds  vote  of 
the  members  of  the  Council  and  a  majority  vote 
of  the  voters  at  one  election  should  be  sufficient 
for  the  issue  of  bonds  and  the  assumption  of  any 
"  undertaking  from  which  the  city  will  derive  a 


678  MUNICIPAL   MONOPOLIES. 

revenue  ;  "  while  the  alienation  of  any  city  prop- 
erty could  not  occur  without  the  vote  of  four- 
fifths  of  the  city  council,  and  any  referendum 
vote  that  the  people  might  arrange  for  in  their 
charter. 

In  arguing  that  a  city  should  have  the  right  of 
municipal  ownership  and  operation,  Dr.  Albert 
Shaw  stated,  in  a  paper  approved  by  his  col- 
leagues :  — 

"  It  is  certainly  an  anomaly,  from  which  we  must  try  to 
deliver  ourselves  in  this  country,  that  a  private  corporation 
may  be  formed,  at  no  expense  and  with  very  doubtful  capi- 
tal and  financial  responsibility,  for  the  sake  of  invading  a 
municipal  corporation,  there  to  perform  public  functions  of 
the  highest  importance,  such  as  municipal  transit,  for  ex- 
ample, while  the  municipal  corporation  itself,  having  the 
highest  and  most  vital  interest  in  that  whole  matter,  is 
placed  at  a  disadvantage  by  the  laws  of  the  State,  so  that 
it  is  altogether  likely  to  be  severely  discriminated  against 
if  it  should  try,  on  its  own  behalf,  with  the  entire  approval 
of  the  great  body  of  the  citizens,  to  render  such  public 
service." 

In  addition  to  the  legal  decisions  permitting 
city  ownership  that  were  quoted  by  Professor 
Parsons,  in  Chapter  VI.,  notably  that  of  the  Su- 
preme Court  of  the  United  States  in  the  Hamil- 
ton, Ohio,  case,  a  remarkable  decision  was  made 
by  the  Indiana  Supreme  Court,  at  the  time  when 
the  city  of  Crawfordsville  sought  to  establish  an 
electric-light  plant  for  lighting  the  streets,  and  for 


REGULATION  OR   OWNERSHIP?  679 

selling  to  private  consumers.1  The  only  statute 
bearing  upon  the  question  simply  permitted  any 
city  council  to  contract  with  a  private  corporation 
for  lighting  streets  and  public  buildings.  The 
court  held  that  in  the  implied  police  powers  of  a 
municipality  was  that  of  lighting  streets  and  pub- 
lic buildings.  "  We  can  see  no  good  reason  why 
it  [the  municipality]  may  not  also,  at  the  same 
time,  furnish  it  [the  electric  light]  to  the  inhabi- 
tants to  light  their  residences  and  places  of  busi- 
ness. To  do  so,  in  our  opinion,  is  a  legitimate 
exercise  of  the  police  power  for  the  preservation 
of  property  and  health." 

The  movement  for  municipalization  in  America, 
as  in  Europe,  has  gone  beyond  the  stage  of  aca- 
demic discussion,  or  the  demands  of  impractical 
enthusiasts.  One  can  now  admit  a  belief  in  own- 
ership by  the  people  of  monopolies  which  concern 
the  people  of  town  or  city,  without  losing  the 
respect  of  either  our  wealthy  or  professional 
classes.  No  one  agent  is  doing  so  much  to  hasten 
the  movement  as  the  grasping  private  owners  of 
many  of  these  monopolies,  who  are  riding  rough- 
shod over  the  rights  of  the  people,  and  convincing 
all  that  the  corrupting  power  of  corporate  influence 
over  legislation  is  growing,  both  on  Beacon  Hill, 

1  City  of  Crawfordsville  vs.  Brad  en,  130  Indiana,  149,  30,  Amer- 
icar.  State  Reports,  214,  quoted  in  "Municipal  Home  Rule,"  by 
Goo.  uow,  pp.  47,  49. 


680  Municipal  monopolies. 

in  sight  of  Faneuil  Hall,  and  near  the  grave  of 
Lincoln  in  the  capital  of  Illinois.  The  one  agent 
that  can  make  the  inevitable  anger  of  the  people 
redound  to  true  progress,  is  he  who  attempts  to 
improve  our  civil  service,  and  introduces  conser- 
vative legislation,  based  upon  faith  in  the  common 
people  and  in  the  growth  of  an  industrial  democ- 
racy which  shall  bring  on  the  people  to  the  exer- 
cise of  all  the  public  spirit  and  civic  patriotism  of 
which  they  are  capable.  To  quote  the  words  of 
one  of  our  most  progressive  mayors,  Mr.  Jones 
of  Toledo :  — 

"  To  say  that  a  private  corporation  can  .  .  .  serve  the 
people  better  than  they  can  serve  themselves  is  an  unwar- 
ranted assumption  of  superiority  on  the  part  of  those  who 
make  the  claim.  It  is  a  flagrant  manifestation  of  a  lack  of 
the  spirit  of  patriotism,  for  no  man  who  is  truly  patriotic 
will  be  willing  to  confess  to  a  desire  to  use  the  people  of 
his  city  simply  for  what  he  can  make  out  of  them.  The 
city  government  is  here  for  the  benefit  of  all  the  people ; 
and  those  who  love  the  city  will  be  quite  as  ready  to  show 
their  patriotism  by  serving  the  city  in  those  fields  where 
they  possess  superiority,  whether  it  be  by  making  gas  or 
other  service,  as  were  the  patriots  who  went  to  Cuba  and 
gave  their  lives  in  front  of  Santiago." 


INDEX. 


Aberdeen,  Scotland,  electric  light, 

167. 
Street-railways,  582. 
Alameda,  Cal.,  electric  light,  70, 

75,  90,  135,  138,  189. 
Albany,  N.Y.,  water,  15. 

Railway,  costofconstruction,l389. 
Alexandria,  Va.,  gas,  611 ;  electric 

light,  199. 
Allegheny,  Pa.,  electric  light,  63, 

70,   141,  143,  167,  197,  205,  211, 

251,  267-68,  280,  281. 
Ames,  la.,  electric  light,  191,  254. 
Arlington,  Minn.,   electric   light, 

70, 138,  140,  194. 
Astor,    William    W.,    introduces 

5-cent  fare  bill,  393. 
Auction  of  franchises  (see  Fran- 
chises). 
Aurora,  111.,  electric  light,  62,  70, 

75,  90,  94,  1S9,  204,  209-10,  243, 

280,  281. 
Austria,  telephones,  344. 

Baltimore,  Md.,  street   railways, 

517-20. 
Bangor,  Me.,  electric  light,  62,  70, 

75,  90,  192,  205,  246,  263. 
Batavia,  N.  Y.,  electric  light,  62, 

64,  128,  143,  196,  206,  253. 
Bath-houses,  public  ownership  of, 

448. 
Baths,  floating,  371. 
Bay  City,  Mich.,  electric  light,  62, 

70,  75,  90,  135,  137,  193,  243. 
Belgium,  telephones,  315-17,  344. 


GS1 


Bellefontaine,  O.,  gas,  613. 
Bell  Telephone  Company  : 
Department  of  Interior,  350. 
Measured  service  in, — 
Boston,  329. 
Chicago,  329. 
New  York,  328-29. 
Philadelphia,  328. 
patents,  326-27. 
profits,  340. 

subsidiary  companies,  327-28. 
Metropolitan    Telephone   Co., 
341. 
what  constitutes  an  instrument, 
342. 
Berlin  street-railways,  562-65,  635. 
Bethlehem,  Pa.,  water,  13, 15. 
Blackpool,  Eng.,  street-railways, 

574. 
Bloomington,  111.,  electric   light, 

70,  75,  90,  190,  243. 
Boston,  Mass.,  gas,  597-600. 
street-railways,  552-54,  556. 
telephones,  329. 
water,  12,  13,  15. 
Bowling  Green,  Ky.,  electric  light, 

70, 192,  243. 
Bradford,  electric  light,  129,  131. 
Brainerd,    Minn.,    electric    light, 

194,  246. 
Braintree,  Mass.,  electric  light,  70, 

152,  154,  157,  158,  192,  258. 
Broadway,  N.  Y.,  surface  railroad, 

New  York  City,  376-77,  466. 
Brooklyn  Bridge.  405-09, 
railway,  566-67. 


682 


IX  J)  EX. 


Canada,  water-works,  28. 
Cantor  Act,  377-81,  416,  420. 
Charter,  Greater  New  York,  369, 
378. 
cities  and  towns  with  power  to 
make  their  own,  432. 
Charlottesville,  Va.,  gas,  612. 
Chicago,  111. : 
electric  light,  63, 70, 75, 90,  94, 135, 

137,  190,  199,  274-79,  280,  281. 
gas,  590,  593,  595. 
street-railways,  529,  533. 
telephones,  329. 
Chicopee,  Mass.,  electric  liglit,  152, 
154,  157,  158,  192,  206, 227-28, 258. 
Cincinnati,  O. : 
gas,  651. 

street-railways,  528-29. 
Cleveland,  Grover,  vetoes  5-cent 

fare  bill,  394. 
Cleveland,  O.,  gas,  591-92,  594-95, 

650. 
Columbus,  Ind.,  electric  light,  190, 

243. 
Compensation,  cost  of  duplication 
as  a  guide : 
for  franchises,  456,  e t  seq. 
for  watered  stock,  459-64. 
In  case  of  public  purchase,  453-66. 
market  value   as   a  guide,  456, 
et  seq. 
Competition  in  gas,  412,  594-95. 
as  regulator  of  gas-companies, 

belief  in,  411,  412. 
between  public  and  private  own- 
ership, 440-52. 
right  of  public  to  compete,  440- 
52. 
Compressed  air,  421. 
Co-operative  telephone,  302,  348-50, 

358-61. 
Cost  of  construction  and  of  opera- 
tion of  city  monopolies  (see 
water,  gas,  electric  light,  tele- 
phones, street-railways). 
Council  Grove,  Kan.,  electric  light, 
70,  91, 138,  192, 


Crawfordsville,  Ind.,  electric  light, 

70,  75,  90,  138,  191. 
Crete,  Neb.,  electric  light,  70,  140, 

195. 
Croton  Aqueduct  Commission,  410. 

Danvers,  Mass.,  electric  light,  75, 

91,  152,  154,  157,  192,  258. 
Danville,  Va.,  electric  light,  148, 

149,  199,  260,  612. 
Decatur,  111.,  electric  light,  70, 243. 
Denmark,  telephones,  343. 
Department  of  the  Interior,  tele- 
phone service  in,  350. 
Depreciation  of  gas,  591. 
electric     light,     108-33,     206-12, 
236-37. 

allowance  for,  in  public  pur- 
chase, 652. 
by  competitive  improvements, 

116-18. 
by  replacement,  118-22. 
by  use,  115-16. 
Des    Moines,    la.,    electric    light, 

185-86. 
Detroit,  Mich.,  electric  light,  63, 
119-24,   141-43,  167,  170-73,  193, 
206,  210,  253,  268-73,  280,  281. 
street-railways  in,  533-37. 
telephones,  358. 
Discrimination,  right  of  public  to 

prevent,  467-68. 
District  of  Columbia,  water,  22,  25 

(see  also  Washington). 
Docks,  New  York  City,  370-71. 
Dow,  Alex : 
advantage  of  public  ownership, 

272. 
cost  of  construction  of  Detroit 

plant,  270. 
gas  cheaper  than  electricity,  588. 
importance  of  uniting  street  and 

commercial  lighting,  239-40. 

views  on  depreciation,  210-11. 

Dublin,  electric  light,  129,  131,  107. 

Duluth,  Minn.,  gas  and  water,  619. 

Dunkirk,  N.  Y.,  electric  light,  62, 


INDEX. 


<;s:; 


65,  70,  75,  90,  94,  140,  143,  196, 
205,  243. 
Education  on  municipal  monopo- 
lies, importance  of,  631-32. 
Electric  light  : 

Capital  Electric  Company, 
Springfield,  111.,  184,  281-84. 

charges  of  private  and  public 
plants,  212-18. 

comparisons,  — 
allowances    for   candle-power 

and  hours,  76-88. 
methods  of,  235-40. 
tables  of,  241-61  (see  Electric 

Light  Tables), 
validity  of,  229-30. 

construction,  cost  per  arc, 
279-80. 

coal,  cost  per  arc,  280-81. 

commercial,  146-61. 

candle-power,  169-70. 

depreciation  of  plant,  206-12. 
in  Massachusetts,  236-37. 

failures,  218-23. 

growth  of,  187-88. 

Legal  aspects  of  public  owner- 
ship in  California,  447  ;  Indi- 
ana, 446  ;  Iowa,  446  ;  Kansas, 
447;  Massachusetts,  449 ;  Min- 
nesota, 448 ;  Missouri,  447  ; 
South  Carolina,  447 ;  Utah, 
447;  Washington,  448;  Wis- 
consin, 448. 

Methods  of  charging  account  to 
consumption,  85-87. 

Municipal,    in    Massachusetts, 
150-56. 
in  Germany,  234,  235. 
in  Great  Britain,  161-68. 
political  phases  of,  173-77. 
conditions  of  success,  178-80. 

outages,  168-73. 

rates,  right  of  public  to  regulate, 
477-180. 

Tables,— 
Age  of  public  plants,  204-06. 
Brighton  rates,  86. 


Electric  Light  Tables: 

Charges,  commercial  in  Michi- 
gan, 213-17. 
United  States,  158-61. 
Massachusetts,     for     street 
arcs    as     compared    with 
commercial  arcs,  145. 
Coal,  cost  per  arc,  281. 
Comparisons    of    public   with 
private  plants,  — 
1,200    candle-power,    under 
1,800  hours,  257. 
1,800  to  3,000  hours,  258-59. 
over  3,000  hours,  260-61. 
2,000     candle-power,     under 
1,800  hours,  24L42. 
1,800   to  3,000  hours,  coal 

under  $2,  243-45. 
1,800  to  3,000  hours,  water- 
power,  246-47. 
1,800  to  3,000  hours,  coal  $2 

to  $3,  248-49. 
1,800  to  3,000  hours,  coal 

over  $3,  250-51. 
over  3,000  hours,  coal  75^ 

to  $1.25,  251-52. 
over  3,000  hours,  coal  §1.50 

to  $2.25,  253-55. 
under  1,800  hours,  256. 
Allegheny,    Detroit,   and    six 
other  public  plants  compared 
with   New  York,    Philadel- 
phia, and  five  other  private 
plants,  143. 
according    to    Foster,    Fran- 
cisco, and  Parsons,  70-73,  75, 
90-91,  94,  135,  138. 
coal,  cost  per  arc,  281. 
construction,    cost    per    arc, 

279-80. 
depreciation  in  Massachusetts, 
207. 
Chicago,  Detroit,  Braintree, 

109-10,  123. 
Glasgow,  Manchester,  Edin- 
burgh, Dublin,   Bradford, 
129. 


684 


IXDEX. 


Electric  Light  Tables: 

depreciation  in  Great  Britain, 
162-65. 
Massachusetts,  152-54,  157. 
New  York,  147. 
labor,  cost  of,  62-63, 
operating  expenses,  American 

and  British,  98,  167. 
ownership,  public,  — 
age  of,  204-06. 
extent    of,    list    of    cities, 

189-99. 
extent  of,  by  States,  202-03. 
statistics    of     eigbt    public 

plants  of  U.  S.,  148-49. 
statistics  of  five  public  plants 
of  Great  Britain,  131. 
outages,  171-73. 

schedules  of  hours  and  candle- 
power,  effects   of,  on  costs 
and  charges,  77-83,  86-87. 
Electrical  conduits  in  New  York 

City,  414-15,  421. 
Elevated   railway  (in   New  York 

City),  391-97,  399,  403. 
Elgin,  111.,  electric  light,  62,  70,  75, 
90,  135,   137,  190,  205,  243.   262, 
279,  281. 
Eminent  domain  not  affected  by 

exclusive  grant,  441-42,  453. 
England  (see  Great  Britain*. 
Fairfield,  la.,  electric  light,  62,  70. 
75,    91,   94,    135,    137,    191,    204, 
266-67. 
Fares,  street-railways,  524-28,  530, 
533-43. 
elevated  railways,  391-95. 
Brooklyn  Bridge,  406-07. 
Glasgow,  578-79. 
Great  Britain,  570. 
New  York  ferries,  368,  416. 
regulation  of.  545-46.  553-54. 
Ferries,  New  York    City,   365-70, 

385-86,  415. 
Foote,  Allen  R..  184,  666-67. 
Fort  Worth,  Tex.,  electric  light, 
198,  258. 


Foster,  Horatio  A.,  68,  92-94,  96- 

100,  133-40,  206. 
France,  telephones,  317-19, 344, 354. 
Franchises  : 
auction  sale  of,  366,  368-69,  375- 

81,  398,  416,  418-20,  638. 
Berlin,  562-65. 
compensation  for,  456-65. 
forfeited  for  abuse,  464-66. 
limitation  of,  367-69,  39S-99,  413, 

416,  420. 
long  term,  folly  of,  639-45. 
Massachusetts,  460-64. 
revocable  at  will,  647-48. 
short  term,  645-47. 
virtual  monopolies,  475-76. 
water-works,  31-36. 
Francisco,  M.  J.,  facts  and  failures 
of    public   lighting,   64,  68-69, 
94-96,  218-21,  223-24. 
Frederick,  Md.,  electric  light,  70, 

91,  135,  137,  192,  248. 
Fredericksburg,  Va.,  gas,  611. 
Fulton,  Robert,  367. 

Galveston,  Tex.,  electric  light,  71, 

91,198,250. 
Gaa  : 
companies  of   New  York   City, 

411-14. 
competition,  593-95. 
cost  of,  — 

in  Boston,  589. 

in  Chicago,  590. 

in  Cleveland,  591. 
depreciation,  591. 
fuel,  421. 
laws  upon  public  ownership  : 

California  law,  447. 

Indiana  law,  446. 

Iowa  law,  446. 

Kansas  law,  447. 

.Massachusetts  law,  449. 

Minnesota  law,  448-49. 

Missouri  law,  447. 

Ohio  law,  445. 

South  Carolina  law,  447. 


INDEX. 


685 


Gas: 
laws  upon  public  ownership  : 

Utah  law,  447. 

Washington  law,  448. 

Wisconsin  law,  448. 
Massachusetts'  experience,  595- 

602,  617. 
progressiveness,  600-01. 
profits  of,  588-95. 
prospects  of,  587-88. 
public  ownership  in, — 

Alexandria,  Va.,  611. 

Bellefontaine,  O.,  613. 

Boston,  597-600. 

Charlottesville,  Va.,  612. 

Danville,  Va.,  612. 

Duluth,  Minn.,  619. 

Great  Britain,  621-28. 

Hamilton,  O.,  613-14. 

Henderson,  Ky.,  616-17. 

Kansas,  620. 

Louisville,  Ky.,  616. 

Middleborough,  Mass.,  618-19. 

Philadelphia,  Pa.,  602-07. 

Richmond,  Va.,  610. 

Toledo,  O.,  615-16. 

Wakefield,  Mass.,  618. 

Wheeling,  W.  Va.,  612-13. 
rates,  right  of  public  to  regulate, 

478-81. 
spoils  system,  603,  619-20. 
trust,  470. 
Germany,  electric  light,  234-35. 
street-railways,  562-65. 
telephones,  314-15,  344. 
Glasgow : 
electric  light,  129-131. 
street-railways,  574-79. 
Grain  elevator : 
cases,  488-89. 
rates,  right  of  public  to  regulate, 

488. 
Grand  Rapids,  Wis.,  telephones, 

359-61. 
Gray,  Professor  John  H.,  regula- 
tion of  monopolies  in  Massa- 
chusetts, 599,  653-55. 


Great  Britain : 
electric  light,  107,  230-33,  621. 
gas,  621-28. 

street-railways,  569-83. 
telephones,  319-26,  344,  355. 
postal  lines,  323-26. 
Greater  New  York  Charter,  369, 
378-79,  416-22. 

Hamilton,  O. : 
electric  light,  160,  196,  206,  254, 

273-74. 
gas,  613-14. 
Hannibal,  Mo.,  electric  light,  63, 

71,75,91,  140,  195,244. 
Harlan  report  on  Chicago  street- 
railways,  513. 
Heating-plants,  public  ownership, 

447-49. 
California,    447 ;    Kansas,    447 ; 

Minnesota,  449. 
Henderson,  Ky.,  gas,  616-17. 
Herkimer,  N.  Y.,  electric  light,  62, 

75,  91,  143, 196. 
Higgins,  Edward  E.,  511-12,  555-56, 

641-42. 
Hingham,  Mass.,  electric  light,  152, 

154,  157,  158,  192. 
Holland,    telephones    of,    310-11, 

344. 
Home  rule  for  cities  and  towns, 

433-10. 
German  rule,  439. 
Hopkins,  Dr.  Win.  R.,  Cleveland 

street-railways,  515-16. 
Huddersf ield,  street-railways, 

572-73. 
Hull,  Mass.,  electric  light,  152, 154, 

157,  158,  192. 
Hunter,  D.  : 
success  of  management  at  Alle- 
gheny, 267-68. 
views  on  depreciation,  267. 

Illinois  Bureau  of  Labor  Statistics, 
report  on  gas  and  street-rail- 
ways, 513-14,590-91. 


686 


INDEX. 


Indianapolis,  Ind. : 

Railway  case,  483-85. 
Insurance,  allowance  for,  electric 

light,  108,  668. 
Interest,  how  to  reckon  it  as  an 
element  of  cost : 
electric  light,  99-102,  235. 
gas,  591. 
Italy,  telephones  of,  344. 

Jacksonville,  Fla.,  electric  light, 

189,  206,  274. 
Jamestown,  N.  Y.,  71,  104,  146,  149, 

158,  196,  205,  260. 
Jones,  Mayor  S.  M.,  615,  664,  680. 

Kalamazoo,  Mich.,  electric  light, 

193,  253. 
Kansas  : 

co-operative  telephones  in,  358. 

electric  light,  202. 

gas,  G20. 

stock-yards  case,  490-91. 

water,  23,  25. 

Lansing,  Mich. : 
electric  light,  147,  148,  158,  193, 
254. 
Law : 
anti-trust  laws,  471-76. 
as  applied  to  monopoly,  425-501 . 
contracts,    restraint    of    trade, 

468-70. 
right  to  regulate  rates  of  ser- 
vice, 477-501  (see  public). 
Leeds,  Eng.,  street-railways,  574. 
Lewiston,  Me.,  electric  light,  62, 

71,  135,  137,  192,  246. 
License  fees  on  street-cars,  New 

York  City,  373,  374,  385. 
Little  Rock,  Ark.,  electric  light, 
62,71,75,91,94,135,137,138,  159, 
189,  205,  263,  279. 
Load  factor,  chart  facing  page  84, 

and  293,  294. 
Logansport,  Ind.,  electric    light, 
148-50,  158,  191,  244. 


Louisville,  Ky.,  gas,  616. 
Low,  Seth,  on  franchises,  421. 
Lumber  trust,  469. 
Luxemburg,  telephones  ,311-12,343. 

Mac  Vicar,  Mayor  John,  letter  on 
Des     Moines     electric     light, 
184-86. 
Manchester,     England,     electric 

light,  129,  131,  1G7. 
Marblehead,  Mass.,  electric  light, 

152,  154,  157,  158,  192,  260. 
Marietta,  O.,  electric  light,  71,  75, 

197,244. 
Marion,   Ind.,  electric  light,    191, 

243. 
Market  value  as  test  of  damage  in 
eminent  domain  proceedings, 
456  et  seq. 
Marshalltown,  la.,  electric  light, 
62,  71,  135,  137,  138,  143,  191,258. 
Massachusetts  : 
electric  ligbt, — 
depreciation  of  plant,  207-08, 

236-37. 
public  plants,  223-28. 
gas,— 
control  of,  by  State  commis- 
sion, 588-90,  594-602,  653-56. 
public  ownership  of,  617-19. 
Special  Street-railway  Commit- 
tee,— 
Report  of,  518-19, 524-25, 529-31, 
538,  558-59,  569-70,  639-41,  646, 
648-49. 
street-railways,  544-G2, — 
issue  of  stock  and  bonds,  547- 

52. 
power  of  board  over  fares  and 
book-keeping,  545-46,  553. 
water,  22-25. 
Match  trust,  469. 
Meadville,  Pa.,  electric  light,  197, 

254. 
Middleborough,     Mass.,     electric 
light,  152,  154,  157,  158,  192,  206, 
226-27,  258,  618-19. 


INDEX. 


687 


Morgan  Park,  111.,  electric  light, 

190,  241. 
Montreal  street-railways,  537-39. 
Monopoly,  importance  of  educa- 
tion on,  G31-32. 

legal  aspects  of,  425-501. 

right  of  public  to  prevent,  466- 
67  (see  public). 

right  of  public  to  regulate  (see 
legislature),  477-501. 

(See  electric  light,  gas,  street- 
railways.) 
Muncie,  lnd.,  electric  light,  191, 

246. 
Municipalities  : 

governmental  and  business  func- 
tion of,  434. 

home  rule  for,  importance  of, 
438-40. 

legislative  control  of,  432-40. 

proposition    of   legislative    acts 
relating  to,  4.38. 
Municipal  construction  : 

of  Brooklyn  Bridge  and  railway, 
404-05. 
constitutionality  of,  404. 

of  rapid  transit  railroad,  399  404. 

of  second  East  River  Bridge, 
409. 

of  street-railway,  385-89. 

(See  electric  light,  gas,  street- 
railways,  telephones.) 
Municipal  lighting,  electric  : 

advantage  of,  in  small  places, 
60-64,  66. 

advantage  of  union  with  public 
water-works,  64-66. 

growth  of,  55-59. 

investigations  of  Foster,  Fran- 
cisco, and  Parsons,  67-76,  88- 
100,  133-42. 

(See  electric  light,  gas.) 
Municipal  operation  : 

advantage  of,  660-68,  680. 

how  to  raise  money  for,  672-73. 

objections  and  difficulties,  668-73. 

recent  growth,  673-79. 


Municipal  operation  : 
(See  electric  light,  gas,  street- 
railways,  telephones.) 
Munn  case,  488. 

Nail  trust,  469. 

National     Telephone     Company, 

319-25  (see  Great  Britain). 
National  Municipal  League,  atti- 
tude of,   toward   city  owner- 
ship, 676-77. 
Nebraska,  decision,  491-501. 

water,  23,  25. 
New  York  and  Harlem  Railway, 

371-72. 
New  York  City  : 
docks  and  wharves,  370-71. 
East  River  bridges,  405-10. 
electricity,  143,  276,  414-15. 
elevated  railway,  391-97. 
ferries,  365-70. 
gas,  411-14. 
general  policy  as  to  franchises, 

415-22. 
rapid  transit,  392-93,  397-404. 
street-railways,  522-25. 
surface  railways,  371-91. 
telephones,  328-29,  341-12,  347. 
water,  15,  410-11. 
New  York  State: 
comptroller,  386. 
constitutional  amendment  as  to 

special  legislation,  375. 
general  laws  as  to    street-rail- 
ways, 375-81,  419. 
law  as  to  ferry  leases,  368. 
railroad  commission,  386-87,394, 

422. 
Special  Assembly  committee  on 

street-railways,  388. 
taxes  on  elevated  railway,  396. 
on  gas-companies,  414. 
on  street-railways  and  ferries, 
386. 
water,  22,  25. 
North  Attleborough,  Mass.,   elec- 
tric light,  152,  154,  157,  158,  192. 


688 


INDEX. 


Norway,  telephones,  301-07,  343. 
Christiania,  304-05. 
Grimstad,  307. 
Hangesimd,  307. 
Stavauger,  307. 
Trondhjem,  305-07. 
Nuisances  and  other  injurious  con- 
duct, right  of  public  to  repress, 
466-68. 

Oil  trust,  469. 

Ownership     of      water-works, 
changes  in,  by  States,  22-28. 

Painesville,  O.,  electric  light,  62, 

71,  94,  135,  137,  197,  243. 
Peabody,  Mass. : 
electric  light,  152,  154,  157,  192, 

260. 
water,  15. 
Pearson,  F.  S.,  cost  of  street-rail- 
ways, 514-15. 
Perrine,  electric  lighting  experi- 
ments, 229-30,  286-96. 
"Philadelphia,  Pa. : 
electric  light,  143. 
gas,  602-07. 

street-railways,  512-13,  520-22. 
telephones,  328. 
Pingree,  Gov.  H.  S.,  views  of,  on 

street-railways,  272,  657-58. 
Pittsburg,  Pa.,  electric  light,  143, 

268. 
Plymouth,    Eng.,  street-railways, 

573-74. 
Port  Arthur,  Out.,  street-railways, 

public  ownership  of,  568. 
Portland,  Ore.,  electric  light,  75, 

90,  138. 
Portugal,  telephones,  344. 
Postal  telegraph  in  Great  Britain, 

323-25. 
Prices  (see  rates). 
Private  enterprise,  right  of  public 

to  compete  with,  440-52. 
Private    ownership    (see    public 
ownership). 


Property,  right  of  public  to  take 

private,  453-66. 
Providence,  R.  I.,  water,  13,  15. 
Public    ownership    (see     electric 
light,     gas     heating     plants, 
street-railways,     telephones, 
water-works), 
bath-houses,  448. 
competition  with  private  enter- 
prises, right  of,  440-52. 
fuel-yards  in  Boston,  427-30. 
grain  in  Boston,  428. 
legal  aspects,  426-40. 
purchase  of  private  plants  and 
compensation  therefor,  453-66. 

Rapid    transit    projects   for  New 

York  City,  397-104. 
Rates  : 
gas  and  electric  light,  478,  481. 
grain  elevators  (Munn  case),  488. 
letters,  telegrams,  etc.,  303  (see 

also  Norway,  Sweden,  etc.). 

Russia,  302. 
principle  of  the  law,  488,  489. 
railroad,  477-86. 

Nebraska  case,  491. 
right  of  public  to  regulate,  447- 

501. 
stock-yards  (Kansas),  490. 
street-railways,  482. 

Indianapolis  case,  483-86. 

right  of  public  to  regulate,  482. 
telegraph    and   telephone,    302, 

482. 
water,  481. 
(See    index    on    electric    light, 

fares,  gas,  regulation,  water.) 
Reading,  Mass.,  electric  light,  148, 

152,  154,  157,  158,  256. 
Recreation  piers,  371. 
Regulation  : 
difficulties  of,  649-60. 
methods  of,  466-501 ,  544-65, 632-39, 

649-52. 
(See  electric  light,  gas,  street- 
railways,  telephones,  water.) 


INDEX. 


089 


Restraint  of  trade,  contracts  in, 

468-70. 
Richmond,  Va. : 

gas,  607-10. 

street-railways,  505. 

telephones,  358. 

Self-government  in  municipalities, 

432-10. 
Services,  right  of  public  to  regu- 
late,  477-501   (see  regulation, 

fares,  rates). 
Sharp,  Jacob,  377. 
Shaw,    Dr.  Albert,  views    of,  on 

municipal   ownership,  644-45, 

C78. 
Sheffield,     Eng.,    street-railways, 

580. 
S  i  n  k  i  n  g-f  u  n  d,  electric-lighting, 

125-33. 
South   Norwalk,    Conn.,    electric 

light,  71,  75,  111,  138,  143,  258. 
Spain,  telephones,  344. 
Spiers,  Professor    Frederick    W., 

Philadelphia    street-railways, 

512-13,  521-22. 
Spoils  system  : 
Chicago,  275-77. 
electric  light,  173,  180,  267. 
gas,  619-20. 
Philadelphia,  603. 
remedies,  660-64. 
water,  37-39. 
Springfield,  111.,  Capital  Electric 

Co.,  184,  281-85. 
Springfield,  Mass.,  street-railways, 

519,  555. 
St.  Joseph,  Mo.,  electric  light,  62, 

243. 
Stockholm,  telephones,  308-10. 
Stock-yards,  regulation  of,  490-91. 
Street-railways : 
benefits  of,  508. 
conditions  in  Baltimore,  517-20; 

Berlin, 562-65  ;  Boston,  552, 555- 

56  ;  British  experience,  569-S3  ; 

Chicago,  513-14,  529-33 ;  Cincin- 


nati, 528,  529;  Cleveland,  515- 
16 ;    Detroit,  533-37  ;  Glasgow, 
574 ;     Massachusetts,     544-62 ; 
Montreal,  537-39;    New  York 
City,    371-404,    513-15,    522-25; 
Philadelphia,     512-13,     520-22; 
Port    Arthur,     Ont.,    568-69 ; 
Springfield,    Mass.,    519;    To- 
ronto, 539-^4;    United  States, 
507,  554-55;  Washington,  D.  C, 
525-27. 
Street  railways  : 
cost  of  construction  in  Albany, 
389  ;  Boston,  555-56  ;  Brooklyn 
Bridge,  567  ;   Chicago,  513-14  ; 
Cleveland,  515  ;  Liverpool,  514- 
15 ;  Mew  York,  389-90 ;  Phila- 
delphia,   512-13 ;    Springfield, 
Mass.,  519,  555;  Syracuse,  388  ; 
Toronto,  542-43  ;  Washington, 
527. 
Fares  and  service,  public  regu- 
lation of,  477-88. 
magnitude  of,  505-08. 
Massachusetts    companies,  544- 

62. 
profits,  509-20,  522-24,  527,  538-39, 

542-44,  555-58. 
public  ownership  of,  America, 
565-69. 
Great  Britain,  569-83. 
legal  status,  446-66. 
with  private  operation,  648-49. 
Underground    conduits,    514-15, 

522-24,  527. 
Watered  stock,  459-64,  499, 512-16, 
522-24,  527,  546-55. 
Sugar  trust,  469. 

Sweden,  telephones  of,  307-10,  343. 
Switzerland,  telephones  of,  312-13. 
Syracuse,  N.  Y.,  electric  light,  143, 
159. 
street-railways  in,  cost  of  con- 
struction of,  388. 

Taxes,  allowance  to  be  made  for 
electric  lighting,  102-00. 


690 


INDEX. 


Taxes  of  gas  companies,  414. 
"of  street-railways,  — 
in  Baltimore,  517-20. 
in  Massachusetts,  560-61. 
in  Montreal,  537-39. 
in  New  York,  386,  396. 
in  Toronto,  539-43. 
Telegrams,  rates  for  telephoning, 

303. 
Telegraph : 
public  ownership  of,  446-49  (see 

telephones), 
rates,  right  of  public  to  regulate, 
482. 
Telephones,  299-361. 
best     methods    of    developing, 

352. 
British  House  of  Commons,  Se- 
lect Committee  on,  355-56. 
co-operative,  302,  348-50,  358-61. 
cost  of  construction,  357-58. 
history  of,  299-300. 
public  and  private  systems,  299, 

303. 
public  ownership  of,  299-300,350- 
52. 
rates,  301-40  (see  Rates), 
ratio  to  population, — 
in  certain  cities,  346-47. 
in  certain  countries,  343-44. 
in  Europe  : 
Austria,  313-14;  Belgium,  315- 
17;  France,  317-19;  Germany, 
314-15  ;  Great  Britain,  319-26 ; 
Holland,  310-11;  Luxemburg, 
311-12;  Norway,  304-07  ;  Swe- 
den,    307-10 ;     Switzerland, 
312-13. 
in  United  States  : 
Boston,  328-29;  Chicago,  329; 
Detroit,  330;  Indiana,  335-36; 
New  York,  328-29,  331,  333, 
341-42 ;      Philadelphia,    328, 
333-34. 
Comparisons  with  Europe,  331- 

39,  343^4,  347. 
co-operation  in,  348-49,  357-01. 


Telephones  in  United  States  : 

cost  of  construction,  348,  350, 

356-61. 
instrument,  meaning  of,  342. 
profits,  339-41. 
Tables,  — 
French  telephone  system,  ex- 
penses and  receipts,  354. 
rates,  Annual,  302. 
rates  for  single  messages,  303. 
ratio  of  telephones  to  popula- 
tion, 343^4,  346-47. 
unifying  influence  of,  351. 
Thomas,  H.  M.,   account    of   the 

Topeka  plant,  210,  264-66. 
Toledo,  O.,  gas,  615-16. 
Topeka,     Kan.,     electric-lighting 
plant,  62,  71,  159,  192,  205,  248, 
280,  281. 
depreciation,  210. 
history  of,  264-66. 
Toronto,  street-railways,  539-44. 

telephones,  358. 
Towns,  right  to  engage  in  business, 

426-10  (see  cities  and  towns). 
Trade,  restraint  of,  contracts  in, 

408-70. 
Trusts : 
anti-trust  laws,  471-76. 
common  law  rule,  468. 
gas  trust,  470. 
lumber  trust,  469. 
match  trust,  469. 
nail  trust,  469. 
oil  trust,  469. 
sugar  trust,  469. 
whisky  trust,  469. 

Underground  electric  traction  sys- 
tem, 514-15,  522-24,  527. 

Wakefield,  Mass.,  electric    light, 
152,  154,   157,  158,  193,  206,  226, 
256. 
gas,  226,  618. 
Water-works  : 
Bethlehem,  Pa.,  13. 


INDEX. 


G91 


Water-works : 
Boston,  11, 12. 
Canada,  28. 

changes  of  ownership,  22-28. 
efficiency,  meaning  of,  5-10. 
franchises  for,  31-36. 
free,  4,  38-39. 
history  of,  11-30. 
in  cities,  12,  13, 15. 
in  States,  22-25. 
New  York,  410-11. 
private    ownership,  advantages 

of,  40-44. 
Providence,  R.  I.,  13. 
public    ownership,  11-30,  37-39, 

45-52,  446-49. 
rates,  right  of  public  to  regulate, 

481. 
Tables,— 

changes  in  superintendence  of 
public  and  private  plants,  43. 


Water-works  Tables : 

ownership   by   States    and 

changes,  22-25. 
public  and  private  works  every 

half  decade,  16. 
water-works  in  1800,  15. 
Watered  stock,  459,  499  (see  Gas 

and  Street-railways). 
Washington,  D.  C. : 
gas,  611. 

street-railways,  525-27. 
water,  22. 
Wharves,  New  York  City,  370-71. 
Wheeling,  W.  Va. : 
electric  light,  62, 199,  206, 251, 280, 

281,  612-13. 
gas,  612-13. 
Whisky  trust,  469. 

Ypsilanti,  Mich.,  electric  light,  71, 
91,  241. 


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